The number of corporate insolvencies is expected to rise around the world because of declining economic growth, higher debt and rising interest rates, the world's largest credit insurer said on Monday.

Euler Hermes said its Global Insolvency Index is expected to increase by 7 percent this year, compared with a fall of 17 percent in 2006.

As many as 29,800 companies, including small enterprises with only one employee, may go bust in the United States this year, followed by 27,300 in Germany, 24,300 in Britain and about 9,400 in Italy, firm said. "The economic downturn that began in 2007 will increase risks for companies, and it will also add more risk of bad debts," said Euler Hermes, a unit of German insurance company Allianz (ALVG.DE: Quote, Profile , Research).

At present, interest payment failures remain at historic lows. The amount of liquidity provided by investors, including hedge funds, and their willingness to fund distressed companies has kept struggling businesses afloat while pushing the price of distressed debt to almost par levels.

Investment banks such as Goldman Sachs Group Inc. (GS.N: Quote, Profile , Research) and Morgan Stanley (MS.N: Quote, Profile , Research) have expanded their restructuring teams, in anticipation of a rise in the number of insolvencies.

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