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The federal government and insurers share premiums

L.For longer than previously agreed, suppliers will be protected from their customers being unable to pay for goods. The federal government and the German insurance industry announced this on Friday. “The protective shield for supply chains remains open,” said Federal Finance Minister Olaf Scholz (SPD). The agreement with the industry is an important element to contain the crisis, “with which we create trust and keep our economy going”. Economy Minister Peter Altmaier (CDU) emphasized that the pandemic was not over yet. The protective shield could help maintain supply relationships and thus stabilize the economy.

With credit insurance, suppliers protect themselves against the buyer of goods at home or abroad going bankrupt after accepting the delivery. If the customer is unable to pay for the goods, the supplier without a policy would bear the financial risk of the business. In exceptional economic situations, however, insurers cannot maintain their capacities for future insurance protection from a risk perspective. In this situation, the federal government and the industry have therefore agreed that the state will step in and receive a large part of the premium income in return.

The term will now be extended to June 30, 2021. From the insurers’ point of view, unwanted chain reactions have so far been prevented with the help of the umbrella. In contrast to a credit insurance program, the success of the agreement cannot be assessed by the volume of cover provided by the state security. Because the very existence of the protective shield leads to the confidence of the suppliers increasing again. “With the protective umbrella, the credit insurers are making a significant contribution to overcoming the crisis and are firmly at the side of their customers even in this difficult economic environment,” said Jörg Asmussen, General Manager of the German Insurance Association (GDV).

The state provides a guarantee of 30 billion euros. This allows credit insurers such as Euler Hermes or Coface to continue to provide limits of 400 billion euros. However, insurers continued to evaluate the creditworthiness of customers. Thus, the protective shield is not a license for risky delivery transactions. The industry participates in the claims payments under the protective umbrella with 10 percent. If the federal guarantee is exhausted, it alone bears the costs. It will forward almost 60 percent of its premium income for the first half of 2021 to the federal government. “According to our estimates, the credit insurers’ limits cover around 15 percent of German exports, among other things, and thus make a significant contribution to the security of the German export industry,” said Asmussen.

“It’s not about propping up credit insurers. Rather, the federal government and credit insurers are acting jointly and in solidarity in the interests of companies, ”said Katarzyna Kompowska, CEO of Coface for Northern Europe. By passing on premiums to the federal government, the credit insurers are actively helping to finance the program. In difficult times, the umbrella creates the greatest possible security, said Ron van het Hof, CEO of the market leader Euler Hermes for the German-speaking region. “In order to achieve this goal, we played a key role in shaping the protective shield for supply chains and in the last few weeks have made a great effort to extend it.”

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