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The European Commission’s temporary framework, which gives member states greater ability to support their economies during the Covid-19 crisis, has recently been extended to June 2021. Initially set to run out at the end of 2020, the framework’s provisions, among other things, give countries additional flexibility on how to demonstrate that certain countries are not-marketable risks.

When the framework was first introduced in March, UK Export Finance (UKEF), the country’s official export credit agency, immediately expanded the scope of its export insurance policy (EXIP) to cover transactions with the EU, Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland and the US. Eight months on, GTR speaks to Carl Williamson, head of trade finance at UKEF, to find out what the impact of this has been, and where requests for support are coming from.

 

GTR: Have you seen an uptake in applications for EXIP after expanding its scope to cover transactions in OECD markets?

Williamson: Since we have been permitted under a temporary framework to undertake cover in OECD countries, we’ve supported double the amount of customers than we did previously. We’ve also seen a significant upswing in applications for companies exporting to the EU and the US and other high-income countries. 

GTR: What are your plans for when the temporary framework ends?

Williamson: The European Commission has recently extended it until the middle of next year, so we will continue to be able to offer cover in those countries at least until then. One of the work streams that we are looking at currently is whether we can work with the banks more closely so that they can take a stake in the export credit insurance policy that will enable them to provide support for SMEs going forwards. We are looking to see if it is possible under our mandate, and whether we can find ways to get that support out more widely.   

GTR: What are you seeing in terms of claims, and what are your expectations?

Williamson: We haven’t seen much activity yet. There has been a slight uptick in the last few months with people asking for payment plans, but nothing really too significant. Our claims ratio is very low, but the big unknown will be next year when a lot of government support schemes come to an end. It’s our role as an ECA to support exporters, especially in downturns. We will protect our customers from financial loss when valid claims are made on insurance policies.

 GTR: The UK government recently introduced a trade credit reinsurance scheme to ensure that coverage and credit limits are maintained during the coronavirus pandemic. Where does EXIP sit within that?

Williamson: The trade credit reinsurance scheme is there to encourage the private market to continue to offer credit insurance. There is still a place for us because they tend to be the whole turnover insurers. We are still seeing companies coming to us because we do the single risk contracts, and we can go to markets that the private insurers won’t go into, even with government support. 

GTR: There has been a great deal of focus by the UK government on supporting SME exporters through the Covid crisis. How accessible is EXIP to SME exporters?

Williamson: Often, when people think of UKEF, they think of the aerospace industry or big overseas infrastructure projects. That is still happening, but we are very keen to focus on SMEs across the country and get them the support they need.

This is very much a relationship business, and we know that SMEs in particular value that personal touch. We have cut down the bureaucracy as much as we can, and we can get these applications turned around far more quickly than we used to. We are not faceless civil servants. We want to support the SME sector, so we will try to get it right the first time and give them a steer on whether we are able to help them at the earliest possible opportunity so they know where they stand. We don’t want to keep people hanging on, because that’s not going to be beneficial with an export contract in play.

 GTR: Can EXIP support SMEs that are still able to access private insurance?

Williamson: UKEF exists to support exporters and particularly where the private market and banks can’t assist, but we are there very much to complement the private market. We are not there to replace it. To be eligible for EXIP support, the exporter must demonstrate that they are unable to obtain credit insurance from the commercial market. However, what we do quite often is fill in the gaps that an exporter might have in their credit insurance cover. For example, an SME could have a whole turnover policy which covers the majority of their debtor book, and we will then come in and cover the more challenging single risks that the private market cannot do.

 GTR: What sectors are demanding the greatest support?

Williamson: Since the Covid downturn we have seen a steep increase in applications for relatively modest-sized export contracts where there is not much risk appetite in the private market for single risk credit insurance. That is where we have really come into our own and where we have seen a tremendous amount of activity in the SME space.

In terms of sectors, the obvious ones are aviation and the travel industry. For example, we recently covered export contracts in Europe and the US for a London-based travel company, TravelBeat, which meant it could keep expanding internationally.

Another example is Brighton-based Peopleforce Recruitment. It provides specialist contract workers to organisations in the aviation and healthcare sectors in the UK and Europe. They contacted us for assistance after their credit insurer withdrew cover for a £2mn contract with an aircraft maintenance company in Estonia. The company needed to ensure they had financial protection in place to cover advance payments to 50 contractors in Turkey and 100 contractors in Estonia worth hundreds of thousands of pounds, and we put together a bespoke EXIP policy to help them bridge that financing gap. Surprisingly, we also seem to being doing a lot in the food sector, albeit very small value transactions.