The first quarter of 2026 has been a busy one for policy and regulation across the credit insurance and surety sector. Legislative processes are advancing on multiple fronts, new consultations have opened, and ICISA has been actively engaged across all of them. To keep members informed of where things stand, this update provides a detailed overview of the key developments across EU banking and insurance regulation, international Basel developments, simplification initiatives, digitalisation, and ICISA’s broader advocacy work.
EU Banking Regulation: Basel III, CRR, and the Treatment of Credit Insurance
The full implementation of Basel III into EU law through CRR and CRD remains one of the most consequential regulatory developments for ICISA members and the one requiring most direct involvement. The framework governs how banks treat credit protection instruments, including credit insurance and surety, when calculating capital requirements. This has a direct effect on the level of use and appetite of banks for credit insurance.
Under the foundation Internal Ratings Based (F-IRB – usually large, international banks) approach of CRR, credit insurance is classified as Unfunded Credit Protection (UFCP). Prior to 2025, banks applying internal models used LGD figures that reflected the actual risk characteristics of credit insurance. The update to EU banking rules that came into effect at the start of 2025 changed this, increasing the LGD significantly to 45% from much lower levels previously used. However, this increase occurred not as a result of a deliberate regulatory choice, but rather due to the lack of one. The Basel standards on which CRR3 is based are largely silent on the use of credit insurance as a credit risk mitigation technique. The 45% LGD floor that now applies is therefore not a considered position on credit insurance. It is the default figure used for unsecured senior exposures, applied to credit insurance in the absence of any specific treatment.
This matters because a 45% LGD assumes the bank is effectively lending on an unsecured basis – that in the event of default, it has no meaningful protection beyond the general claim of a senior creditor. Credit insurance is fundamentally different. It provides contractual indemnification, is subject to strict underwriting, and includes significant additional policyholder protections under the Solvency II regime that reduce the loss a bank would actually face. Treating it as equivalent to an unsecured exposure is an error of omission in the regulatory framework, not a reflection of its risk profile. The consequence is that banks using credit insurance as protection must hold materially more capital than the underlying risk warrants. This creates a significant structural disincentive for its use, with direct consequences for trade finance availability and pricing.
The practical consequences of this barrier are now visible in the market. A recent study by ITFA and IACPM found that CRI usage by banks has plateaued at around EUR 400-500 billion over the past two years, with the regulatory constraint identified as a significant factor. At the same time, the study found that Standard Approach banks, which apply a different methodology, are increasing their use of credit insurance, partially offsetting the broader stagnation. This shift warrants attention. Standard Approach banks are typically less familiar with credit insurance than the larger IRB institutions that have historically been the primary users. Insurers should be mindful of this as they engage with a wider range of bank counterparties, ensuring that product education and structuring support keep pace with demand from this newer segment.
To address the issue, ICISA is actively supporting a number of industry initiatives. One such approach has seen an amendment proposed by a number of Italian MEPs within European Parliament discussions on the securitisation package currently being negotiated. The substance of the amendment – reducing the LGD floor from 45% to 22.5% – has no direct connection to securitisation, but it touches on similar EU policy objectives around financing the real economy. The amendment would need to secure majority support among MEPs before proceeding to trilogue negotiations with the Council. The prospects for success at both stages are uncertain. However, its inclusion in the legislative debate is itself significant. It reflects a growing acknowledgement among policymakers that the current LGD level is disproportionate and that the failure to address the specific role credit insurance plays in the EU’s financing system – compared to other jurisdictions – requires attention.
The EBA also has an ongoing consultation on the credit risk framework, which provides an opportunity to make the same arguments in a more targeted technical setting. ICISA has submitted to this effect, making the case that credit insurance should not be treated as equivalent to an unsecured senior exposure. A credit insurance policy carries specific contractual protections, is actively managed, and is issued by regulated insurers subject to their own capital requirements. The Commission’s broader review of the competitiveness of the EU banking framework provides a further venue for these arguments. ICISA is working with the International Underwriting Association and the Lloyd’s Market Association on a joint response to highlight our respective views. Any resulting changes from this effort would likely not take effect until mid-2028 or beyond.
ICISA recently wrote to Commissioner Valdis Dombrovskis in his capacity overseeing the EU’s simplification agenda, making the same substantive point: that the current treatment of credit insurance under CRR is not proportionate to its actual risk characteristics, and that correcting this is consistent with the Commission’s broader competitiveness and simplification objectives. ICISA will continue to pursue all available channels and will update members as each process develops.
International Basel Developments: United States and United Kingdom
In the United States, revised Basel Endgame proposals have been published. The banking industry has responded more positively than to previous iterations, with capitalisation levels likely to reduce marginally overall. However, on the use of credit insurance, the current drafts do not include provisions that would enable eligibility for capital relief purposes. This falls short of industry objectives, though the path has not been formally closed. ICISA will continue to work with industry partners locally to monitor this and explore appropriate channels for engagement as final rules are developed.
In the United Kingdom, the PRA continues to take a wait-and-see approach to Basel III implementation, indicating it does not intend to deviate from the Basel framework without clear justification. The treatment of credit insurance therefore remains aligned with the broader Basel position for the time being. The UK has also indicated that if others move on this or related topics, it reserves the right to remain aligned.
Solvency II Review
The revised Solvency II framework is now entering into force following several years of review. The adjustments include a number of technical changes across the framework, including to the Minimum Capital Requirement (MCR) calculation for insurers across different lines. This incorporates changes to the MCR for the credit and surety line of business. Members are encouraged to review the specific MCR provisions applicable to them with their supervisors and advisers.
Of particular relevance to credit insurance is a new requirement within the Regular Supervisory Reporting (RSR) framework. This includes provisions requiring undertakings to report liquidity exposures to financing transactions, including factoring. ICISA engaged directly with EIOPA and the Commission during the legislative process to clarify the scope of this provision. The understanding reached is that the obligation relates to exposures on the asset side of the balance sheet – where an insurer has itself invested in or extended financing to such transactions – and does not extend to the underwriting of factoring risks or similar trade credit insurance business. Members should nonetheless confirm with their national supervisors how they interpret this requirement.
Insurance Recovery and Resolution Directive (IRRD)
EIOPA has issued final guidelines to support national resolution authorities in implementing the IRRD, with application from January 2027. One element that members should note is the concept of “critical functions.” Where a line of business is identified as critical in a given market, the relevant resolution authority would be required to develop resolution plans for undertakings writing that business.
EIOPA’s guidelines include credit and surety, alongside other lines, in an illustrative list of functions that may potentially be identified as critical in one or more markets. The list was compiled from the experience of some resolution authorities and is provided for illustrative purposes only – no function qualifies automatically as critical. National authorities must apply defined criteria under Article 2(25) of the IRRD, assessing both the likely significant impact on the real economy or financial system and whether the function could be substituted within a reasonable time and at reasonable cost. Members active in markets where credit or surety forms a significant part of the financial infrastructure should be alert to this process as national authorities begin their assessments ahead of the 2027 application date.
EU Simplification Agenda
The Commission is pursuing simplification through several legislative vehicles, including the Digital Omnibus and the ESG Omnibus, both aimed at reducing compliance burdens across financial services and the broader economy. ICISA supports these efforts where they produce clearer, more proportionate rules.
One area of particular relevance to members is data privacy. ICISA has raised concerns about GDPR application in some member states, where national authorities have adopted strict interpretations that create difficulties for credit insurance operations – in particular, treating information relating to sole traders and to directors and officers of companies as personal data rather than commercial data. This creates obstacles to routine underwriting, risk assessment, and claims management. ICISA supports a more calibrated interpretation and will continue to engage with the Commission and relevant authorities on this point.
A further measure under the simplification agenda is the proposed EU Inc. regime and the associated 28th Regime concept. These initiatives would create a new EU-level corporate form sitting alongside existing national frameworks, potentially offering a simpler, more harmonised structure for companies – particularly smaller businesses – operating across EU borders. For credit and surety members, the practical relevance is most likely felt in the context of insolvency proceedings, where the current patchwork of national frameworks creates complexity and uncertainty for companies with cross-border exposures. A more uniform regime could reduce that burden meaningfully. ICISA will monitor developments and engage where the interests of members are at stake.
Digitalisation and Trade Efficiency
In January, ICISA submitted a response to a consultation by the Hong Kong authorities on the adoption of the Model Law on Electronic Transferable Records (MLETR). ICISA supports MLETR adoption as a necessary and positive development, both in Hong Kong and as part of a broader effort to align trade document standards with digital practice. Electronic transferable records reduce administrative friction, support faster settlement, and improve the integrity of trade finance transactions. ICISA will continue to engage with relevant authorities on MLETR adoption and related digitalisation initiatives.
Capital adequacy in Türkiye
ICISA is monitoring regulatory proposals and policy developments in a number of jurisdictions outside the EU. One ongoing development relates to consideration of capital adequacy requirements for insurers in Türkiye. ICISA is in contact with members active locally to assess the scope and potential impact of the proposed changes on credit and surety, and will consider how best to support members and the local market. Further information will be shared as the situation develops.
Emerging Markets and International Development
ICISA continues to support efforts to spread credit insurance and surety to new markets, as well as international trade and development initiatives such as TF COP (Trade Finance Conference of Parties). Our efforts focus in particular on sharing best practice and building capacity in emerging markets. In the first months of 2026, ICISA engaged with the EBRD, Afreximbank, and other multilateral and regional institutions on topics relating to credit and surety’s contribution to trade and investment. These engagements reflect ICISA’s broader objective of demonstrating the value of the industry to development finance institutions and encouraging frameworks that enable credit and surety to operate effectively alongside other instruments.
For further information on any of the issues covered in this update, please contact the ICISA Secretariat.
