Euler Hermes pushes for Gov support as it prepares to reduce exposure
Euler Hermes is reviewing its exposure in light of COVID-19 pandemic, the credit insurer has confirmed.
In a note sent to customers Euler said that it will be "reviewing our credit limit decisions in certain areas", with businesses in many sectors struggling to maintain cash flow through lockdown.
It said its decisions will be based partly on its forecasts of GDP falling 3.3 per cent globally this year and 8.2 per cent in the UK.
Global insolvencies could rise by as much as 25 per cent, it added.
It said that certain sectors - including aviation, travel and hospitality - have been hit hard, but added that "there is no doubt that many companies across all sectors and markets are experiencing significant cashflow and liquidity pressures in the immediate term".
The note confirmed that Euler is in talks with the UK government about a support package, claiming that, if a protection scheme is put in place, it could "significantly reduce the amount of cover being affected".
The firm has been vocal in the support it has received from governments across Europe, including in France, Germany and Belgium.
A Euler spokesperson told CRN: "Despite the lockdown in effect in many parts of the world, we continue to provide our clients with a consistent and high quality service. Our teams are able to fulfil their duties working remotely and are collaborating with clients to help them navigate the rapidly changing risk environment.
"We provide cover against the risk of non-payment, whether by insolvency or through late payment (protracted default). The current crisis brings with it a significant increase in late payments and additional risks that our clients may face unpaid invoices. Euler Hermes objective - aligned with its clients - is to create a protective shield against these risks.
"We continue to assess market risk in real time and remain committed to providing clients with the support to trade with confidence. Credit risk is by nature dynamic and levels of risk vary according to circumstances. Due to the current crisis, certain buyers may present heightened levels of risk of non-payment and deteriorated credit worthiness.
"As a response, Euler Hermes may adapt the risk ratings of these buyers and reduce the credit limits available to clients accordingly. This always applies only to future trade transactions and is primarily aimed at steering clients away from imminent and predictable risk of non-payment."
One credit insurance expert told CRN that the note is likely a move to apply pressure to the government.
"Until now Euler Hermes have held the line and not embarked on a mass review of credit limits," they said.
"This is clearly in expectation of support from the UK Government, given their successes in negotiating similar schemes on the continent.
"This communication to policyholders is almost certainly an expression of Euler's agitation with the UK Government dragging their feet on this issue."