Will the protection for trade credit (= schutzschirm) be extended? The insurers are now taking a clear position: after June 30, they no longer want to make use of the government guarantee, which covers default risks for an amount of 30 billion euros.
Bad news for many non-food retailers: the government’s protective umbrella for trade credit insurance is coming to an end for good by mid-year. A spokesperson for insurance association GDV has reported this. The joint protective procedure of the government and trade credit insurers “will end as agreed on June 30, 2021,” said a GDV spokesperson. “There are currently no talks with the government about an extension thereafter, and none of the trade credit insurers involved is pursuing a renewed extension.”
“Schutzschirm” must prevent credit insurers from extensively lowering trade credit limits during the Corona crisis to minimize their default risks. In the current climate, this is mainly a problem for retailers in the non-food sector and their suppliers. As many retailers in the non-food sector are low on cash due to the lockdowns, they are often viewed critically by credit insurers. Retailers now fear that credit limits could be lowered after protection expires.
Credit lines worth EUR 400 billion
The protection was last renewed at the end of last year. Under the terms of the agreement, the government guarantees that it will bear up to EUR 30 billion in damages from credit insurers. In return, the credit insurers have pledged to secure EUR 400 billion in credit lines. However, “Schutzschirm” is expensive for insurers: they recently had to hand over 60 percent of their premium income for the first half of 2021 to the government for protection.
Despite the ongoing lockdown and the difficulties of the non-food retail sector in particular, insurance association GDV believes that the purpose of the protection has been achieved. According to the Commission, there is no longer any need to fear a “supply chain collapse”, thus overturning the original purpose of “schutzschirmverfahren”. “Insurance coverage can and should again be provided solely on the basis of market economy principles,” explain the insurers.