Daniel de Búrca, Head of Public Affairs at ICISA, wrote an article about understanding the impact of government intervention on credit insurance during the pandemic. Below there’s a summary of this, while the full article is available here.
- Government interventions during the pandemic were successful in preserving and protecting businesses in the real economy. However, new challenges have emerged as we exit the pandemic related to supply chain issues, geopolitical tensions and rising inflation. This is likely to result in reduced growth in the global economy.
- Support targeted at the credit insurance market during the pandemic, included state-backed reinsurance arrangements. This support gave initial confidence boosts to market participants to maintain cover, rather than reduce exposures at a time of uncertainty.
- The EU also temporarily enabled state-backed insurers to underwrite risks otherwise considered off-limits due to competition rules. However, that tool was limited in effectiveness due to its bluntness. Equally, other support, including credit insurance schemes perhaps remained in place for too long when markets were ready to return to normal.
- Support to the real economy too lacked clear indications of timing of withdrawal and could have benefited from being more targeted at those sectors most heavily impacted by the pandemic.
- For the credit insurance sector, a key lesson learned is building awareness about the products offered and their role in supporting trade and economic resilience during normal periods, while maintaining close contact with governments during crises so that the most appropriate policy decisions can be made in support of the real economy.