European Commission approves €2 billion Italian guarantee scheme to support trade credit insurance market in the context of the coronavirus outbreak

The European Commission has approved, under EU State aid rules, a €2 billion Italian scheme to support the trade credit insurance market in the context of the coronavirus outbreak.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “This €2 billion Italian scheme will contribute to ensuring that trade credit insurance remains available to all companies so that they can secure their commercial exchanges. This will help them address their liquidity needs and continue their activities during and after the crisis. We continue working closely with Member States to ensure that national support measures can be put in place in a coordinated and effective manner, in line with EU rules.”

The Italian support measure

Italy notified to the Commission a State guarantee scheme for the reinsurance of trade credit risks to support companies affected by the coronavirus outbreak. The scheme will be administered by SACE, the Italian Export Credit Agency.

Trade credit insurance protects companies supplying goods and services against the risk of nonpayment by their clients. Given the economic impact of the coronavirus outbreak, the risk of insurers not being willing to issue this insurance has become higher.

The Italian scheme, with an estimated budget of €2 billion, will ensure that trade credit insurance continues to be available to all companies, avoiding the need for buyers of goods or services to pay in advance, therefore reducing their immediate liquidity needs.

The Commission assessed the measure under EU State aid rules, and in particular Article 107(3)(b) of the Treaty on the Functioning of the European Union (TFEU), which enables the Commission to approve State aid measures implemented by Member States to remedy a serious disturbance in their economy.

The Commission found that the scheme notified by Italy, is compatible with the principles set out in the EU Treaty and is well targeted to remedy a serious disturbance to the Italian economy. In particular, (i) the trade credit insurers have committed to Italy to maintain, or reinstate, their level of protection as of 1 April 2020 in spite of the economic difficulties faced by companies due to the coronavirus outbreak; (ii) the guarantee is limited to only cover trade credit originated until the end of this year; (iii) the scheme is open to all credit insurers in Italy; (iv) the guarantee mechanism ensures risk sharing between the insurers and the State, up to a volume of €2 billion, and (v) the guarantee fee provides a sufficient remuneration for the Italian State.

The Commission concluded that the measure will contribute to managing the economic impact of the coronavirus in Italy. It is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the general principles set out in Temporary Framework. Furthermore, the Commission has found the scheme is in line with the Short-term export-credit Communication.

On this basis, the Commission approved the measures under EU State aid rules.