Economic Recovery Hinges on Trade Credit Insurance Support
A new report by leading trade credit insurers warns that a lack of government support for the industry could hinder U.S. economic recovery. Reduced coverage capacity risks $46 billion in production and 155,000 jobs.
A report commissioned by major trade credit insurers Euler Hermes, Coface, and Atradius highlights the critical role of trade credit insurance in supporting the U.S. economy's recovery from the COVID-19 pandemic. The study warns that significant cutbacks in insurance coverage capacity, driven by economic uncertainty, could impede business activity and job creation.
The report finds that without government intervention, the reduction in trade credit insurance coverage could stifle approximately $46 billion in additional production and prevent the creation of around 155,000 jobs among supplier firms. Trade credit insurance covers the risk of non-payment of accounts receivable, a vital function for businesses operating on credit terms.
The three insurers, who collectively hold about 60% of the U.S. market, are advocating for a government reinsurance program. Under this proposal, the U.S. government would share the non-payment risk with the insurers, allowing the industry to maintain or increase coverage levels during the economic downturn.
More than 60% of trade credit insurance customers in the U.S. are small and medium-sized businesses. The insurance not only protects against non-payment but also enhances a company's access to financing, as banks are more willing to lend against insured receivables. The report argues that this access to capital is crucial for maintaining liquidity and supporting continued growth.