While the effects of the Covid-19 pandemic on the Irish economy have been extensively analysed and documented in recent weeks, one area which is pivotal in facilitating trade and maintaining supply chains has not received as much recognition : the imperative role of commercial credit insurance sector.
At present almost €15bn of trade is underwritten by the three main insurers in the Irish market (Atradius, Coface and Euler Hermes), that equates to over €50bn in annual turnover. Domestic credit insurance assists the flow of goods and services on the island of Ireland and will continue to be part of the fabric of many business sectors. With such an open economy, export credit insurance will play an even greater role in the months ahead if we are to emerge from a recession quickly.
We have a very strong, professional credit insurance commercial sector in Ireland and those businesses that have a policy are receiving the very best in service from their insurers and brokers (like Credit Risk Brokers). In recent weeks two of the main underwriters have already taken steps to support their clients by extending policy reporting deadlines on overdue debts. This will better allow insured businesses to work with their customers to get payments in while remaining fully covered in the event of default.
The importance of a stable credit insurance market has now been recognised by the EU Commission and they have recently issued guidelines to EU member states. In mid- April, first to take action on foot of this notice was the German government which approved a support package with an initial guarantee of €5bn (up to a possible €30bn), they committed to underwrite the first €500m in claims relating to the Covid pandemic. The Danish are introducing a similar mechanism while the Dutch are also close to approval of a similar scheme and the UK are reviewing a submission from the sector.
If the Irish ministers can take time to understand commercial trade credit insurance in Ireland, they would surely include a support package for the main credit insurers in a simple, non-invasive manner that would allow them to maintain current levels of underwritten Irish trade. Credit insurers know Irish trade better than anyone. If they had government support, similar to the positive initiatives in other countries, our recovery would certainly be faster and smoother.
If there continues to be no government guarantee given to the Irish credit insurers a German exporter could sell to an Irish buyer on credit terms and they would be insured as previously, only now guaranteed by the German government. An Irish insured supplier trying to sell on credit to the same buyer could have cover reduced or withdrawn. The Irish company cannot compete and ultimately, the Irish economy cannot compete.
Against this background, it is appropriate that our leaders take measures to incentivise and support the credit insurers to continue to play their role in continuing to support economic activity in Ireland. As Ireland’s only specialist broker that dedicates 100% of our activity to trade credit, we have been lobbying Government Ministers in recent weeks, asking that they engage with us so that they might gain an understanding of the significance of trade credit stability. Three of the main insurers in Ireland are also in contact with the government and we understand they have made a combined approach appealing for support. We were delighted to receive a formal response from the Minister for Business, Enterprise and Innovation, Heather Humphreys T.D., advising that they are actively monitoring the market for credit insurance in Ireland and, specifically, how Covid-19 has impacted that market. We will provide an update as soon we receive any news.
Trade credit insurance protects companies supplying goods and services against the risk of non-payment by their clients as well as governing the levels of credit extended to an Irish business from a foreign supplier. It is imperative that we raise awareness and knowledge of how it works among our companies and government as it is integral to our economic survival, recovery and growth.
If you are interested in enquiring about a credit insurance policy, please contact us. If you have a policy already & might appreciate our specialist support, we at Credit Risk Brokers would be delighted to hear from you also.
Stay safe and well!