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State aid in short-term export-credit insurance
The Commission aims to remove distortions of competition due to state aid in the short-term export-credit insurance sector where there is competition between public or publicly supported export-credit insurers and private export-credit insurers. This communication states that, as a general rule, marketable risks cannot be covered by export-credit insurance with the support of European Union (EU) countries.
Commission communication to the Member States pursuant to Article 88(1) of the Treaty applying Articles 87 and 88 of the Treaty to short-term export-credit insurance (Text with EEA relevance) [Official Journal C 281 of 17.09.1997].
Communication of the Commission to Member States amending the communication pursuant to Article 93(1) of the EC Treaty applying Articles 92 and 93 of the Treaty to short-term export-credit insurance [Official Journal C 325 of 22.12.2005].
Communication of the Commission amending the period of application of Communication of the Commission to the Member States pursuant to Article 93(1) of the EC Treaty applying Articles 92 and 93 of the Treaty to short-term export-credit insurance [Official Journal C 329 of 7.12.2010].
In some European Union (EU) countries public or publicly supported export-credit agencies insure short-term export risks for the account or with the guarantee of the state by financing transactions in the EU and with a large number of non-EU countries.
From a competition viewpoint, the fact that these credit-insurance agencies enjoy certain financial advantages granted by the state enables them to offer better credit-insurance terms, and this may distort competition in relation to private insurers. This communication aims to remove distortions of competition due to state aid in the export-credit insurance sector.
This communication applies to state aid in the short-term export-credit insurance sector. It does not, however, deal with the insurance of medium and long-term export-credit risks, which are largely non-marketable at the present time.
Definition of "marketable" risks
Marketable risks are risks for which in principle a market exists, i.e. there is a private insurance capacity available to cover these risks. The definition of which risks are marketable may evolve over time.
At present, marketable risks are defined as commercial and political risks on public and non-public debtors established within the European Union and in certain of the Organisation for Economic Co-operation and Development (OECD) member countries. They are linked to short-term export credits with a maximum risk period of less than two years. All other risks are excluded from the definition of marketable risks and from the scope of this communication. Despite this definition of marketable risks, if and to the extent that no private insurance market exists in the EU country, commercial and political risks incurred on public and non-public debtors established in the countries listed in the annex to this communication are considered to be temporarily non-marketable if incurred by small and medium-sized enterprises with a total annual export turnover not exceeding EUR 2 million.
Factors distorting competition and measures to be taken to restore the free interplay of competition on the market
The communication identifies the factors that may distort competition in favour of public export-credit insurers, including:
- state guarantees enabling insurers to borrow at rates lower than the normal market rates or making it possible for them to borrow money at all;
- any difference in the obligations on public insurers and private insurers as regards the maintenance of adequate provisions;
- relief or exemption from taxes normally payable;
- grants of aid or provisions of capital by the state.
In order to remove distortions of competition in this sector, EU countries are called on to eliminate the following types of state aid:
- state guarantees for borrowing or losses;
- exemption from the requirement to constitute adequate reserves;
- relief or exemption from taxes or other charges normally payable;
- the granting of aid, the provision of capital or the granting of other forms of finance in circumstances or on terms that a private investor acting under normal market conditions would not accept;
- provision by the state of services in kind (such as access to and use of state infrastructure, facilities or privileged information) on terms not reflecting their cost;
- reinsurance by the state on terms more favourable than those available from the market.
Exceptionally, where export-credit insurers are temporarily unable to cover marketable risks because of insufficient insurance or reinsurance capacity, those temporarily non-marketable risks may be covered by a public or publicly supported export credit insurer with the support of the state. In such cases, the insurer shall, as far as possible, align its premium rates for such risks with the rates charged elsewhere by private export-credit insurers for the type of risk in question. Any EU countries intending to use the escape clause must notify this to the Commission and wait for a Commission approval.
The agencies will, in addition, have to keep a separate administration and separate accounts for their insurance of marketable risks and non-marketable risks for the account and with the guarantee of the state.
Monitoring by the Commission
The Commission will monitor at all times national reinsurance schemes on the basis of six-monthly reports presented by EU countries. The communication will remain in force until 31 December 2012.
In December 2008, as a consequence of the financial crisis, the Commission adopted the Temporary framework for State aid measures to support access to finance in the current financial and economic crisis ('the Temporary Framework' ), which introduced a temporary procedural simplification to point 4.4 of the 1997 communication, regarding the demonstration of the unavailability of cover for short-term export-credit. This procedural simplification will be valid till 31 December 2011.