The COVID-19 pandemic: A role for the Irish Government in protecting the €15bn underwritten by the Commercial Credit Insurance Sector
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 in the hardware & construction sectors has not received as much recognition : the important role of commercial credit insurance.
At present almost €15bn of trade is underwritten by the main insurers in the Irish market, that equates to over €50bn in annual turnover. Credit insurance assists the flow of goods & services into and on the island of Ireland and will play a 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 policy holders are receiving the very best in service from their insurers and brokers (like Credit Risk Brokers).
Recently two of the main underwriters have 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 members. In mid-April, irst to take action on foot of this notice was the German government who approved a support package with an initial guarantee of €5bn (up to a possible €30bn), they committed to underwrite the fi rst ¤500m in claims relating to the COVID-19 pandemic. The Danish are introducing a similar mechanism while the Dutch and UK are reviewing a submission from their local insurers.
If Irish ministers better understood 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.
Most notably, 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 approached 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 & services against the risk of non-payment by their clients as well as governing the levels of credit extended to an Irish business from both domestic & foreign suppliers. It is imperative that we raise awareness of how credit insurance will be integral to our economic survival, recovery and growth post COVID-19. 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!
This Business Support article appeared in the May/June 2020 edition of The Hardware Journal.