NEWS RELEASE – FOR IMMEDIATE RELEASE
Contact: Vladimir Gololobov
Vice President, International
TRADE CREDIT INSURANCE BACKSTOP HELPS BROAD ECONOMIC RECOVERY
Washington, D.C. – July 9, 2020 – The Council of Insurance Agents & Brokers received the study “A Strong Recovery Requires a Healthy Trade Credit Insurance Industry” released today by economists Robert Litan and Dr. Yong Xu, which makes a compelling case for the trade credit insurance (TCI) backstop. As U.S. companies struggle with a liquidity crisis due to the pandemic, the research estimates the effect of tight credit insurance on enterprises’ production and employment, and stresses the role the insurance sector and government play in the proposed TCI mechanism.
“The pandemic has been a difficult test to the insurance industry’s resilience and an opportunity to join forces with the government in addressing economic damage,” said Ken A. Crerar, president/CEO of The Council. “In the face of such extraordinary challenges, government participation in the trade credit insurance backstop is indispensable. The backstop is only a temporary solution to help U.S. companies, 60% of whom are small and medium-sized enterprises, stay competitive and operational, and the industry is here to help.”
According to the study, TCI provides a financial backstop to companies with over two million American employees and supports $600 billion worth of U.S. sales. TCI remains a prerequisite for companies to maintain credit lines with banks to continue operations and avoid further disruption in supply chains. Due to current delays in payment, firms confront more stringent terms of insurance, thus affordable trade credit insurance will be essential to overall economic recovery.
Today’s research – focused only on direct, conservative losses – concludes that decreased insurance will inhibit gross supplier output by $46 billion and the hiring of approximately 155,000 workers. These estimates would be even higher if downstream buyers’ losses were included and if further insurance restrictions were introduced during a pandemic second wave—unless the government extends backstop guarantees.