Recently three of the world’s largest credit insurers, Euler Hermes, Coface and Atradius came together for the first time and produced a report that proposes a government reinsurance policy to support the US economy.
The report addresses concerns regarding cutbacks in Trade Credit Insurance (TCI)
coverage that has been caused by the pandemic. This TCI coverage is relied upon by exporters and could result in up to $46bn in lost production and cost 155,000 in new job creation in the US alone. This has been a topic of discussion in other countries, who are now assessing options to support.
TCI is not well known and yet, it provides a critical role in supporting the growth of a country’s export market, and most notable the SME segment, which is critical in supply chains. Those companies that know about it and use it believe it provides them with a competitive advantage. Furthermore, it will support all countries in their recovery from the pandemic.
So what are the benefits of TCI to the exporter?
TCI provides a tangible value to the receivables, which enables banks to increase the amount they loan to the exporter, up to 90% of the indemnity amount. The bank is taking less risk and the business has access to more capital.
Impact of the pandemic
Insurers are forced to scale back in higher risk segments. The report cites TCI coverage reducing by 14% so far this year. Companies will not be able to meet the demand from buyers as trade picks up and this will slow the recovery down.
The report encourages governments, specifically the US to introduce a temporary government quota share reinsurance program.
There is much more to this story and if you are an exporter using TCI today or someone who would like to learn more about it, contact Elevatefinance.ca
To access the full report, click on the link below: