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Businesses: government renews public guarantee against non-payment

Published on October 20, 2020 - 2 mins reading time
Bank watch
In the spring of 2020, the government introduced a public guarantee scheme via Caisse Centrale de Réassurance (CCR) for credit insurers, which cover companies against the risk of non-payment by their customers. This scheme will be renewed.

The public guarantee system

The public guarantee scheme, dubbed the "public reinsurance of corporate credit insurance risks" scheme, has been in force since April 15, 2020. Credit insurers are a key link in the economy, thanks to the protection they offer companies against payment default by their customers.

However, in the event of an economic crisis, credit insurers lower the level of protection to limit their risks, thereby exposing companies to the consequences of the crisis. To remedy this problem, the government has introduced 4 public credit insurance products, enabling insurers who subscribe to these offers toprovide better protection for companies.

These 4 products, CAP, CAP+, Cap Francexport and Cap Francexport +, have been supplemented by the CAP Relais program, which commits the French State to 75% of the risks covered, in exchange for the collection of 75% of the premiums. This exceptional scheme, introduced in June, is not likely to be extended. However, the other products will be maintained in 2021.

The public guarantee represents a budget of 15 billion euros, and an amendment to the 2021 Finance Bill (PLF) has confirmed its continuation.

Guarantees in the form of insurance policy endorsements

CAP, CAP+, Cap Francexport and Cap Francexport + are additional guarantees, known as "public credit insurance supplements". They can be requested by companies whose credit insurers decide to terminate a cover, or to reduce the level of protection. They are offered in the form of endorsements to insurance contracts.

Several credit insurers are participating in this scheme, including Groupama Assurance-crédit & Caution, Axa Assurcrédit, Euler Hermes, Atradius and Coface.

However, many companies remain concerned, as they have seen their premiums increase, sometimes by as much as 50% or more. The government, via CCR, is working to make its 4 products less expensive, to make them accessible to more companies.