Spain has received approval for a €500 million reinsurance rescue package to support the country’s trade credit sector amid the rising costs of the COVID pandemic.
The European Commission has approved, under EU State aid rules, the reinsurance scheme to support the trade credit insurance market in the context of the coronavirus outbreak.
The Commission said that given the prolonged economic impact of the coronavirus outbreak, the risk of insurers not being willing to maintain their insurance coverage has become higher.
“The scheme aims at ensuring that trade credit insurance will continue 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,” it added.
The scheme is designed to supplement private reinsurance and will allow insurers to choose a coverage of public re-insurance guarantee of up to 60%. Risk and premia are then shared pro-rata between the State and the private insurers.
The Commission said it had assessed the measure under 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 Spanish scheme 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 the State aid Temporary Framework,” added a spokesman. “Furthermore, the Commission has found the scheme is in line with the Short-term export-credit Communication. On this basis, the Commission has approved the measure under EU State aid rules.”