Expected increases in both claims and demand in the year ahead were the key take-aways from the latest ICISA State of the Industry survey. Looking at the wider context, members noted the important role played by state support schemes, including credit insurance schemes in this period.

With many of the credit insurance schemes due to expire shortly, we look at this topic in more detail, as well as discuss what ICISA is doing to help members as they develop their thinking and prepare for the future.

Most TCI members responding to our latest State of the Industry survey reported that they participate in one or more of the state-backed credit insurance schemes. These schemes form part of the wider suite of measures used by countries to insulate businesses from the worst impacts of the pandemic.

Most credit insurance schemes are located in EU member states, but can also be found in the UK, Canada and a small number of other non-EU countries. In the EU, these fall under the state aid temporary framework, which sets out broadly what member states can do to support their economies at this time. This temporary framework was due to expire in June, but was extended earlier this year until the end of 2021. Credit insurance schemes in the EU also follow this timeframe, but with terms of the schemes due to expire in June, discussions with governments will begin shortly.

With widespread agreement early on in the pandemic, credit insurance schemes were introduced to ensure limits could be maintained at a time when insurers acting prudently may otherwise have to reduce their exposures. As noted in a recent EIOPA staff paper, “Many governments acted quickly in the COVID-19 crisis and, by means of state protection shields, enabled credit insurers to maintain their limits – for the benefit of their customers and the economy at large”.

It was not possible to tell at the time, but other measures have had a significant impact on the functioning of credit insurance schemes. These other measures, which maintained liquidity in the real economy or deferred insolvencies, significantly reduced the occurrence of exactly the kinds of loss events the credit insurance schemes were designed to cover. At the same time, members have reported that schemes come with a significant administrative and reporting burden, as well as cost implications.

As discussed elsewhere in this edition of the Insider, how governments choose to open economies is a hugely important question. ICISA members will be paying very close attention to the decisions of policymakers in the coming months. If a more permanent recovery takes hold in the summer, governments will need to be ready to pull the levers available to them to restart the economy. Planning on how and in what order measures are lifted is essential to avoid unnecessary shocks at a time when the recovery may be relatively fragile.

Which measures are maintained and which are lifted will be key. Those measures that directly support viable but vulnerable businesses will likely be prioritised. Resuming normal functioning of debt resolution mechanisms will be important. As mentioned, members expect claims to rise as some of these support measures are lifted. Getting the order and pacing of these next steps will be crucial to avoid unnecessary shocks on the one hand, and continuing to artificially preserve non-viable businesses on the other. What role the credit insurance schemes have in different markets during this transition and emergence phase of the pandemic remains open.

To support ICISA members, we will continue to provide a forum for discussion of the challenges in the market, as well as opportunities to consider different approaches for the future. We have consulted members involved in schemes on the likely discussions ahead and what options and preferences they have. A white paper on possible models for schemes produced by ICISA early in the pandemic was influential and distributed widely. If members would benefit from another white paper setting out options for schemes in the coming months, we will provide this.

ICISA has closely engaged with the European Commission during this time to communicate the views of members on a range of topics related to the pandemic. This includes a regular call for closer coordination of member state actions. With coordination of the way out of lockdown required, we will continue to make that case to key stakeholders. Our aim as ever is to support members in the decisions they make in their own markets, as well as inform ongoing debates and represent members views effectively.

Daniel de Búrca
Daniel de Búrca Head of Public Affairs at ICISA