CM September 2020

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OPINION NEW FEATURE ALL SYSTEMS GO UK support scheme receives EC go-ahead. AUTHOR – Kevin Godier Kevin Godier THE European Commission (EC) has finally approved plans for approximately €11bn (GBP £9.9bn) in temporary UK state aid to guarantee private trade credit insurance (TCI) cover for British businesses during the COVID-19 crisis. The late July move ended a 10-week wait since a mid-May Government pledge to backstop excess losses that UK credit insurers may suffer from offering such cover. Now, the UK Government has effectively become a reinsurer, able to shoulder 90 percent of potential losses in return for a similar portion of the participating insurers’ premium. The state support scheme is the first of its kind in the UK, adding to the protection that TCI underwriters in Britain already had in place against large losses through their existing reinsurance programmes. However, with multiple signals suggesting that corporate payment defaults triggered by the coronavirus outbreak could outstrip levels experienced during the One onlooker, Fitch Ratings, believes that the trade credit backstops provided by Governments in Europe and elsewhere – as well as overall measures to aid the global economy – can help stem potential TCI losses from the COVID-19 fallout. global financial crisis of 2008/09, the TCI industry has understandably adopted a significantly more cautious approach to B2B business activity. In a statement, the EC explained that its approval for the UK initiative aligned with European Union (EU) state aid rules, on the grounds that the economic fallout from the pandemic has lessened appetite within the insurance sector to cover businesses under trade credit policies. The backstop means trade credit insurers in Britain can maintain the level of protection offered to businesses before the coronavirus outbreak. In the UK, TCI provided cover for £171bn of business activity at end-April 2020, covering 13,000 suppliers and 650,000 buyers, according to the Association of British Insurers (ABI). Essentially, the UK Government can now pay 90 percent of TCI claims, with insurers picking up the tab for the remaining 10 percent of losses. The scheme is open to all trade credit insurers in the UK until the end of the year, the EC said. All UKdomiciled businesses with a trade credit insurance policy can be covered for both their domestic and export trade, and there will be a review at the end of September on potentially extending the scheme. The move was welcomed by Atradius, which confirmed the scheme is ‘now in place and operational.’ The initiative ‘improves the trading environment for those firms that purchase credit insurance (our customers) and for the hundreds of thousands of UK businesses that are covered in our portfolio (our customers’ customers),’ according to an Atradius spokesperson. This view was corroborated by the ABI, which said the new scheme ‘is on track to ensure that widespread availability of cover can continue.’ It said that TCI underwriters ‘have been considering their involvement in the scheme, with a number of major providers having confirmed their participation.’ Atradius, Coface, Euler Hermes, Markel Corporation and QBE Insurance Group have opted into the scheme, S&P Global noted on 2 August. The delays were explained by one participant as tightly linked to the complexity and size of the agreement. ‘It could be compared to an M&A deal, with lots of moving parts, and last-minute adjustments. The need for all parties – the UK Treasury, the Department for Business, Energy and Industrial Strategy, the ABI, private TCI underwriters and the EC itself – to agree took up considerable amounts of time.’ One onlooker, Fitch Ratings, believes that the trade credit backstops provided by Governments in Europe and elsewhere – as well as overall measures to aid the global economy – can help stem potential TCI losses from the COVID-19 fallout. Fitch said that pandemic-related credit insurance claims will peak in late 2020 and continue well into 2021, after which credit insurers’ financial performance should then improve as they re-underwrite business at higher prices to recoup losses and meet higher demand. Kevin Godier is a freelance journalist and editor of International Trade Finance. Advancing the credit profession / www.cicm.com / September 2020 / PAGE 29
Page 1 and 2: CREDIT MANAGEMENT CM SEPTEMBER 2020
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Page 7 and 8: NEWS ROUNDUP CICM in new TV venture
Page 9 and 10: PHILLIPS & Cohen Associates, the le
Page 12 and 13: presents
Page 14 and 15: % 0,6 0,5 Pre- crisis Late During p
Page 16 and 17: Level 4 Apprenticeship Counter Frau
Page 18 and 19: OPINION START THE REVOLUTION Invoic
Page 20 and 21: Let us show you why our years of Hi
Page 22 and 23: LEGAL MATTERS SPARK OUT A landmark
Page 24 and 25: COUNTRY FOCUS Germany is still the
Page 26 and 27: COUNTRY FOCUS AUTHOR - Adam Bernste
Page 30 and 31: INTERNATIONAL TRADE Monthly round-u
Page 32 and 33: ADVISORY COUNCIL Shaping the future
Page 34 and 35: NEW FEATURE PANEL BASHERS Understan
Page 36 and 37: Appointment | Credit Academy Traine
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Page 40 and 41: INTRODUCING OUR CORPORATE PARTNERS
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Page 44 and 45: INTERVIEW SMALL TALK Satago CEO Sin
Page 46 and 47: INTERVIEW AUTHOR - Sean Feast FCICM
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Page 52 and 53: OBITUARY Paul Mudge - a life fully
Page 54 and 55: Streamline your customer onboarding
Page 56 and 57: TAKE CONTROL OF YOUR CREDIT CAREER
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CM September 2020

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