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Commission approves Dutch trade credit insurance guarantee scheme

26th May 2020 - Author: Luke Gallin

The European Commission has approved a Dutch guarantee scheme to support the region’s trade credit insurance market amid the pressures of the ongoing coronavirus (COVID-19) pandemic.

As the economic fallout from the current crisis has intensified, the risk of insurers not being willing to provide trade credit insurance has increased, leading to government intervention in numerous parts of the world.

The latest European country to announce a backstop for trade credit insurers is the Netherlands, after the country notified to the Commission a State guarantee scheme, which has now been approved under EU State aid rules.

This scheme has been designed to ensure that trade credit insurance, which protects companies supplying goods and services against the risk of non-payment, is available to all firms, avoiding the need for buyers of goods or services to pay in advance, which reduces their immediate liquidity needs.

Executive Vice President, Margrethe Vestager, in charge of competition policy, commented: “The Dutch guarantee scheme will help ensure that trade credit insurance remains available to all companies to secure their commercial exchanges. This will protect their liquidity needs and help them continue their activities in these difficult times. We continue working closely with Member States to ensure that national support measures can be put in place in a coordinated and effective manner, in line with EU rules.”

Following an assessment, the Commission found that the Dutch scheme is compatible with the principles set out in the EU Treaty and is well targeted to remedy a serious disturbance to the region’s economy.

According to the Commission, this includes the fact that the trade credit insures in the country have committed to the Netherlands to maintain their current level of protection despite COVID-19-induced challenges; the fact the guarantee is limited to cover just trade credit originated until the end of 2020; that the scheme is open to all credit insurers in the Netherlands; that the guarantee scheme ensures risk sharing between the insurers and the state, up to a volume of €1 billion, and provides an additional safety-net to cover up to €12 billion in total; and, that the guarantee fee provides a sufficient remuneration to the state.

“The Commission concluded that the measure will contribute to managing the economic impact of the coronavirus in the Netherlands,” says the Commission.

Last week, the ABI voiced its support for the UK Government’s now confirmed scheme to provide a reinsurance backstop for trade credit insurers. The push from public and private sector entities to protect the trade credit insurance market comes as reports suggest market losses due to the pandemic could reach as high as $46 billion.

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