Trade Credit Insurers Balk at Greek Risk

Two of the world’s biggest trade credit insurers have stopped providing cover for exporters to Greece in highly unusual moves reflecting their concern the country might leave the euro zone.

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Brokers said the decisions by Euler Hermes and Coface were the only instances they could recall of trade credit insurers pulling out altogether from a European country.

The insurers cover the risk to companies that their clients will run into such serious financial difficulties that they will be unable to pay their bills.

Kostis Michalos, chairman of the Athens Chamber of Commerce, said: “It gives importers a very difficult choice: find an alternative insurer and pay through the nose, or simply take the risk themselves — which is what some companies will do.”

Their withdrawals in part reflect the risk that Greek importers will still have an obligation to pay their suppliers in euros even if the country readopts the drachma.

Euler Hermes, owned by German insurer Allianz, has reduced cover in recent months, but said on Wednesday it had decided to suspend offering new insurance altogether.

“Due to the recent economic developments and political uncertainties, exporting to Greece has become substantially more risky,” it said.

“Shipments already made remain insured. As soon as the situation improves, Euler Hermes will reconsider its decision.”

Coface, another large global trade credit insurer based in France, disclosed on Wednesday that it had stopped writing new contracts several months ago.

Greek imports have declined significantly over the past two years, amid a worsening credit squeeze and a sharp fall in domestic demand.

More than 20 percent of retail outlets nationwide selling imported goods have shut down, according to the Greek retailers’ association. “We see that goods are already missing from supermarket shelves as the situation has worsened,” Mr. Michalos said.

One importer of household fittings said: “It will create further issues for Greek buyers ... It reinforces the vicious circle that we’re in.”

An importer of paper products said: “Over the past two years, Greek importers have moved from payment on delivery plus 90 days, to payment on delivery, to payment before goods are shipped,” he said.

“This is another blow but at this stage only to be expected.”

Robert Nijhout, executive director at trade body The International Credit Insurance & Surety Association, said: “Greece — and southern Europe overall — is a concern.

“In 2011 our claims rose by 30 percent as an industry, largely caused by losses in that part of Europe.”

Tim Smith, head of trade credit at insurance broker Marsh, said: “Usually they are more likely to withdraw from certain industry sectors or companies. For an underwriter to withdraw it needs to be under extreme circumstances — such as when they start to see widespread defaults.”