Under new EU state aid rules, the European Commission has approved an Italian € 2 billion (US $ 2.4 billion) scheme to support the insurance market. credit throughout the COVID-19 pandemic.
Italy has notified the Commission of a state guarantee scheme for the reinsurance of trade credit risks to support businesses affected by the coronavirus pandemic.
Executive Vice-President Margrethe Vestager, responsible for competition policy, said: “This Italian € 2 billion scheme will help ensure that trade credit insurance remains accessible to all businesses so that they can secure their trade.
“This will help them meet their liquidity needs and continue to operate during and after the crisis. We continue to work 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. “
Trade credit insurance aims to protect businesses providing goods and services against the risk of non-payment from their customers. Due to COVID-19, the current economic environment has caused the risk that insurers are unwilling to issue this insurance to become higher.
The Italian program, with an estimated budget of € 2 billion, will ensure that trade credit insurance remains accessible to all businesses, preventing buyers of goods or services from paying in advance, thereby reducing their immediate liquidity needs.
The scheme was specifically created for cases of extreme economic situations, such as the COVID-19 pandemic, which caused an economic crisis that faced all member states and the UK.
The EU state will only allow member states to provide types of aid if the country is in economic difficulty. However, the Member States will have to undertake to avoid the undue accumulation of support measures for the same companies in order to limit the support to their real needs.
Temporary guidance can be granted by Member States and currently provides for a number of different aids. Direct grants, capital injections, selective tax breaks and prepayments are available as well as guarantees for loans taken out by businesses to ensure that banks continue to provide loans to customers who need them.
Other aids are available such as subsidized public loans to businesses which also come with advantageous interest rates. These loans allow businesses to meet their immediate working capital and investment needs. There is also access for the safeguard of banks which channel State aid to the real economy.
This temporary structure will allow Member States to combine all support measures with each other. However, Member States must avoid any undue influence of support measures for the same companies in order to limit the support to their real needs.
The scheme will be in place until the end of December 2020, but will be reassessed beforehand to see if it needs to be extended.