Sovereign guarantee fund to ensure continued access to trade credit insurance for Danish companies
A new DKK 30 billion sovereign guarantee fund established by the Danish government will ensure that Danish businesses continue to have access to credit insurance for their transactions during a difficult time.
How the scheme works
The scheme covers transactions with short credit periods – typically of up to 180 days. Danish companies needing to take out credit insurance for their transactions should contact one of the four following credit insurers:
When Danish companies conduct trade with other companies, both in Denmark and internationally, they customarily take out insurance for their transactions. If a customer is suddenly unable or unwilling to pay for a delivery, the insurance covers the loss and the seller receives their payment.
The insurance eliminates much of the uncertainty for the companies, allowing them to do business without requiring payment up front.
On an annual basis, transactions worth up to DKK 450 billion are insured in Denmark, and an estimated 2,500-3,000 Danish companies have an insurance agreement with one of the private credit insurance companies Atradius, Coface, Euler Hermes or Tryg Garanti.
Crisis causes uncertainty for trade credit insurers
Now, however, as a result of the disruption caused to business-as-usual by the corona crisis, export orders, B2B transactions and payments that would formerly have been honoured as a matter of course are subject to uncertainty and increased insurer risk aversion.
A number of companies are afflicted by cash-flow problems or insolvency, and are suddenly unable to pay, which makes it risky for private credit insurers to offer insurance. For this reason, Danish companies risk being turned down by credit insurers during what is already a difficult time.
Government scheme ensures insurance cover
To counter this problem, the Danish government is now putting in place a guarantee scheme to ensure that Danish companies have access to insuring their transactions with credit periods of up to 180 days. In specific terms, this means that the Danish government assumes a percentage of the credit insurers' risk of loss from insurance taken out in 2020. Under the protection of this sovereign guarantee, the private credit insurance companies have pledged to maintain their insurance capacity on the Danish market.
A sovereign guarantee fund of DKK 30 billion will be established for 2020. The scheme will be administered by EKF Denmark's Export Credit Agency, but requires the approval of the European Commission before it comes into force.
"At a time of crisis like this, we are pleased to be able to give Danish companies added support by ensuring that they continue to have access to credit insurance for their sales to Danish and international buyers. We look forward to extending our existing productive reinsurance cooperation with Atradius, Euler Hermes, Coface and Tryg Garanti," says Kirstine Damkjær, CEO at EKF.
Morten Wium Olesen, Communications Consultant
Tel. +45 2819 1122