Accessibility of special coverage in Short-term export-credit insurance
The impact of the coronavirus (COVID-19) is being felt by all businesses around the world. Current situation unprecedently threatens the global supply chains, financial markets and, above all, the operations and financial health of a large number of both Slovenian and foreign companies. As a result, there has been a shortage of insurance coverage in the credit insurance market managed by private credit insurers. In order to alleviate this problem, the European Commission has decided that this shortage of insurance cover and market gap can be filled by Member States with various state support instruments.
Depending on the nature of business, accounts receivable represents a substantial proportion of business assets. With enabling defer payment of goods and/or services to foreign buyers, the seller/exporter is granting the export-credit. Deferred payment is a temporary postponement of the payment and consequently bears credit risk, referring to buyer payment default due to insolvency and protracted payment. To mitigate credit risk, companies typically insure themselves with credit insurance offered by private insurers. Before the coronavirus outbreak, European Commission, in order to ensure free competition on the market, prohibited any aid granted by Member States or through State resources in any form which could give exporters an advantage, and with that distort competition and affect trade between Member States. However, given the current situation linked with coronavirus outbreak, where a lack of insurance coverage is expected together with a significant increase in demand for this type of insurance, it has become clear that a market gap is emerging in this market.
Considering these events, the European Commission has decided to temporarily remove the ban and with that enabled the Member States to fill this market gap with various state support instruments. This decision will be in force till 31 December 2020. Before that date, the European Commission, will re-assess the situation and decide whether the decision will be extended even further. Thus, according to the decision, it is possible to implement additional special coverage (credit limits) for buyers of Slovenian companies whose credit limit has been reduced or cancelled by the selected insurance company.
To check the possibility of implementation in your company, contact us at firstname.lastname@example.org or on tel. number 01 292 60 96
This article was written by the team of ALPHA CREDO