Euler Hermes welcomes credit insurance scheme but criticises banks

The credit insurance giant’s chief executive Fabrice Desnos called the scheme, announced by Chancellor Alistair Darling today, a “recognition of the strategic importance of credit insurance”.

But he added that banks should shoulder some responsibility for businesses getting into financial difficulty.

Desnos said: “We must not forget that it is the unwillingness of the banks to lend without security, and underwrite their own risk, that is still causing a problem in a large majority of cases. When funding levels are reliant on credit insurance limits being maintained, it is simply not right that the banks assume that somebody else should assume the risk.”

Euler Hermes, along with Atradius and Coface, have agreed to offer the Government scheme to their eligible clients.

The insurance giant believes the Government scheme will help return confidence to the supply chain and “give credit insurance clients and their buyers another tool to manage the short term impacts of the current economic crisis”.

But it does not believe many companies will take advantage of it.

Desnos said: “We don’t expect the take-up for the scheme to be very high but if it makes a difference for a thousand SMEs where credit insurance is a significant component of their business model, then it will have been a success.

“Through this top-up scheme, the government is effectively endorsing our risk management decisions. It recognises that some risks will not be worth taking and this is an important point: this scheme is not about bailing out bad businesses; it is all about protecting good businesses.”

Euler Hermes said it acknowledges the “pressure” put on suppliers when cover is withdrawn or scaled back, but said the new scheme will “soften these soften these necessary adjustments”, providing “breathing space”.

He added: “This is not squandering tax payers’ money, neither is any of the tax payers money going into the credit insurers’ coffers. The government recognises the critical importance of credit insurance to enable trade, and has taken time to consider and calibrate the industry’s proposals to ensure best use of the public purse. We have worked very positively with government over the last few months to deliver a scheme we believe is well designed and balanced.”