Cologne, 4 December 2020 - The international credit insurer Atradius extends its involvement in the federal government's protective umbrella for the supply chains of the German economy
As a member of the GDV (Gesamtverband der Deutschen Versicherungswirtschaft eV), Atradius, together with other German trade credit insurers and the federal government, agreed to continue the measure until June 30, 2021, subject to the approval of the EU Commission. With the extension of the government's rescue package, the credit insurers and the federal government want to jointly maintain important flows of goods in the worsening corona crisis and curb the risk of payment defaults for German suppliers. This applies in particular to transactions with customers who were economically sound before Corona, but got into trouble due to the pandemic. The credit insurers and the federal government first made the agreement in April of this year. It was initially only valid until December 31, 2020.
“The agreement between the federal government and the credit insurers has helped considerably in stabilizing German entrepreneurs in recent months. With the second lockdown, however, the situation has worsened for many companies. In this very difficult situation, we continue to meet our responsibility for the German economy and, together with the federal government, support German companies in doing business safely,” says Dr. Thomas Langen, Senior Regional Director Germany, Central and Eastern Europe at Atradius and at the same time spokesman for the GDV Credit Insurance Commission.
The risk of bad debts will increase significantly
Due to a large number of support measures, such as the relaxation of the obligation to file for insolvency, there has not yet been an increase in company insolvencies to the extent feared in the course of 2020. Nevertheless, the bad debt risk for German companies has increased significantly since the outbreak of the pandemic. The current payment practice barometer study by the credit insurer shows that after March of this year, an average of 7% of the total value of the sales of the German companies surveyed were uncollectible and had to be written off. This is more than triple the level in the previous study, when this value was still 2%.
Atradius anticipates a sharp increase in bad debt losses due to corporate insolvencies in the coming months, among other things because since October companies that are insolvent have been going to the local court again and have to file for bankruptcy. “In the current phase, bad debt protection is more important than ever for companies. The probability that a buyer fails to pay an invoice is extremely high. When the seller has to wait too long to receive payment, or in the worst case, when it is not paid at all, they don’t have money to pay their own liabilities. Against this background, the extension of the rescue package will help stabilize the supply chain, provided that the companies insure their bad debts with trade credit insurance,” says Dr. Thomas Langen.