Criticism of Credit Insurers During the Corona Crisis
Insurance providers in the credit sector under scrutiny for instigating business predicament, as per BGA president's accusations
Credit insurers, such as Euler Hermes, Atradius, Coface, and Allianz Trade, provide policies to protect businesses against the risk of their customer defaults (for instance, through bankruptcy). During the Corona pandemic, there was widespread economic uncertainty, causing many businesses to rapidly demand protection from credit insurers.
Criticism Against Credit Insurers
- Reduction or Cancellation of Policies: Many businesses complained that credit insurers significantly reduced their coverage or even cancelled it - often without sufficient notice and in the face of increasing default risks.
- Political and Economic Criticism: The government and business associations harshly criticised the withdrawal of credit insurers, as it threatened the liquidity of many businesses, particularly the precariously affected SME sector.
- Lack of Pandemic Coverage: Particularly criticised was the fact that pandemic-related defaults were often not covered by the policies, as these were usually explicitly excluded from the contracts.
Leading providers, who were named in this context, were particularly Euler Hermes (German market), Atradius, and Coface.
Government Measures to Secure Financial Risks
Given that the withdrawal of private credit insurers threatened the supply of credit to the economy, many governments intervened:
Germany
- Government Financial Aid and Guarantees: The federal government provided direct financial aid as well as guarantees (through the KfW and the Corona Guarantee Facility) to support companies and banks in granting loans.
- De-minimis Regulations for Credit Insurers: There were efforts to include credit insurers in government aid measures to offset coverage gaps. However, these measures remained rather limited; the focus was on direct company support.
- Insurance Industry Criticism: The insurers referred to the economic impossibility of insuring pandemic risks and demanded a state reinsurance solution.
European Union
- European Guarantee Facility: The EU made funds available to secure the granting of loans to companies, also to fill gaps created by private credit insurers.
- Debate over a Pan-European Solution: There was discussion about extending the German Hermes coverage model to EU level to better protect companies. However, a comprehensive implementation remained unachieved.
International
- State Reinsurance Solutions: Individual countries (such as France, the Netherlands) were examining or implementing models in which the state acts as a reinsurer for pandemic-related defaults.
- Limited Support for Credit Insurers: In many cases, support for credit insurers remained limited, as government measures primarily focused on direct company support and the credit insurance industry did not receive comprehensive state backing.
Conclusion
Criticism was particularly levelled at large credit insurers like Euler Hermes, Atradius, and Coface, because they tightened their coverage restrictions and showed little flexibility during the crisis. Politically, direct company support and government guarantees for loans were primarily provided. Special measures to secure credit insurers remained limited; a comprehensive reinsurance solution for pandemic risks was not implemented.
In the future, there may be discussions about a stronger state involvement in system crises to ensure the functioning of the credit insurance market.
If you want more details about specific companies, industries, or countries, feel free to ask! - The new president of the BGA, Anton Börner, has stated that credit insurers are causing problems for the economy. - The economic situation, according to credit insurers' analysts, is predicted to have negative developments. - Credit insurers are reducing limits or significantly increasing premiums because their analysts predict negative developments in the economic situation. - The comments were made in the Thursday editions of the Funke media group's newspapers. - The comments made by Anton Börner were shared in the Thursday editions of the Funke media group's newspapers. - Anton Börner made these comments to the Funke media group's newspapers. - Despite federal government guarantees, the economy is still facing problems due to the actions of credit insurers. - Companies are having trouble with credit insurers due to their actions during the corona crisis. - The federal government has provided guarantees to credit insurers, as mentioned in the email. - Anton Börner has criticized credit insurers for their business practices during the corona crisis.
The Role of Credit Insurers in the Economy
Credit insurers play a crucial role in the economy by providing insurance to businesses against the risk of their customers defaulting on payments. This allows businesses to continue trading and investing even when there is uncertainty in the economy.
During the Corona pandemic, the economic uncertainty led to many businesses seeking protection from credit insurers. However, some credit insurers have been criticised for their actions during this time.
The Criticism Against Credit Insurers
Critics argue that credit insurers have been too conservative in their approach, reducing coverage or cancelling policies without sufficient notice and in the face of increasing default risks. This has left many businesses without the protection they need, particularly during a time of economic uncertainty.
Furthermore, some credit insurers have been criticised for not providing adequate coverage for pandemic-related defaults, as these were often explicitly excluded from the policies. This has left many businesses exposed to the risk of default, particularly during a time when the economic outlook is uncertain.
The Response of the Government
In response to the criticism, many governments have intervened to provide support to businesses and banks. In Germany, for example, the federal government has provided direct financial aid and guarantees to support companies and banks in granting loans.
However, the response of the government to the actions of credit insurers has been limited. There have been efforts to include credit insurers in government aid measures to offset coverage gaps, but these measures have remained rather limited.
The Future of Credit Insurers
The actions of credit insurers during the Corona pandemic have raised questions about their role in the economy and the need for greater regulation. Some argue that credit insurers should be required to provide more comprehensive coverage for pandemic-related risks, while others argue that the government should provide a reinsurance solution to cover these risks.
In the future, it is likely that there will be discussions about the need for greater state involvement in the credit insurance market to ensure its functioning during system crises. This could include the provision of a reinsurance solution for pandemic risks, as well as greater regulation of the industry to ensure that it serves the needs of businesses and the economy as a whole.
If you have any questions or would like more information about the role of credit insurers in the economy, please don't hesitate to ask!
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