Euler Hermes says the UK government’s scheme to backstop trade credit insurers will allow businesses to trade confidently and aid in their financial recovery.
The scheme will involve the state sharing a portion of the risk taken on by trade credit cover specialists like Euler Hermes, acting as their reinsurer – although the government hasn’t outlined what percentage of the risk it will bare.
Earlier this month, analysts at Morgan Stanley estimated that trade credit insurers around the world could endure losses of up to $46bn, 30% of which would be paid by the reinsurance market.
The government said it stepped in “to prevent the withdrawal of credit insurance, or premiums increasing to unaffordable levels” in the UK, which Euler Hermes welcomed.
Euler Hermes UK and Ireland CEO Milo Bogaerts said: “Ensuring UK businesses can continue to trade in confidence while they recover from the effects of the crisis is essential.
“This temporary reinsurance support creates a protective shield for credit-insured clients during this crisis.
“It will ensure that essential coverage remains in place and liquidity maintained across the supply chain.”
Germany, France, and Canada have made similar moves to protect trade in their countries.