Trade partnership boosts Canadian companies with additional credit capacity

Trade partnership boosts Canadian companies with additional credit capacity | Insurance Business Canada

Trade partnership boosts Canadian companies with additional credit capacity

Several Canadian insurers have banded together to provide additional credit capacity to the Trade Partnership Insurance (TPI) program in order to support Canadian businesses impacted by the COVID-19 pandemic.

The public/private collaboration behind the enhanced trade credit scheme includes the Government of Canada, Export Development Canada (EDC) and several private credit insurance providers who are members of the Receivables Insurance Association of Canada (RIAC). The partnership has been ongoing since early March, following an announcement by the Government of Canada on March 24 of a broader mandate for EDC to provide emergency liquidity to Canadian businesses through Canadian financial institutions and private credit insurance providers.

Read next: What is trade credit insurance?

The TPI is a select buyer reinsurance product that will give RIAC member brokers and other trade credit insurance brokers in Canada the ability to offer enhanced receivables insurance policies underwritten by RIAC member insurance companies. The private trade credit insurers providing the additional capacity for the TPI include Euler Hermes, Atradius, Coface Canada and The Guarantee Company of North America.

Government-mandated assistance for Canadian businesses is enabled by EDC, which provides a backstop to excessive losses from claims that private sector insurers experience. This will enable insurers to support sales to companies where such support may not otherwise be available, while also enabling Canadian businesses to trade securely, both domestically and on an export basis, at a time when getting paid and securing cash flow are more important than ever.

“We’re supporting the TPI as it provides enhanced credit capacity to the Canadian marketplace,” said David Dienesch (pictured), CEO of Euler Hermes Canada. “Companies can use credit insurance to increase their working capital with banks and increase their sales. The Government of Canada is providing extra liquidity to the market, so that businesses can trade securely, and EDC is the conduit for this vehicle.” Deinesch added that while the TPI is “not perfect yet,” Euler Hermes Canada and other RIAC members are working with the Government to improve it and ensure that the needs of Canadian businesses are fully met.

Read more: Euler Hermes sees 10% uptick in profit

This isn’t the only time in recent history that public and private credit insurers have banded together to reinvigorate a damaged Canadian credit market. The current program mirrors a similar collaboration set up to assist Canadian companies during the 2008/2009 economic crisis.

Chris Short, country manager for Atradius in Canada, commented: “In times of economic uncertainty, the availability of credit becomes a key component of managing both the downturn and the recovery. The updating of TPI, which has been in place for export business since 2015, allows for credit to remain in place as part of a collaborative effort between the private sector and the Canadian government. Canadian companies benefit from the added capacity being brought to the market. The negotiation to implement this program was completed in record time – under two months – from the beginning of the crisis. The program is a collaborative effort with both private and public sector sharing in the risk.”

RIAC president Mark Attley also commented on the speed of the implementation. He described the enhanced TPI as “a tremendously valuable outcome” of the process the association began back in March with a letter to Canadian Finance Minister Morneau. Attley commented: “RIAC members worked tirelessly putting together a viable program that will support Canadian businesses as they struggle with the challenges brought on by the COVID-19 crisis.”

As chairperson for the RIAC, Dienesch pushed for the association to contact Global Affairs as soon as Canada started to feel the impact of the coronavirus pandemic. He told Insurance Business: “In March, Global Affairs and the Ministry of Finance acted quickly to provide EDC with enhanced powers, which allowed private market insurance companies, like Euler Hermes, to use the TPI for both domestic and export transactions.

“I’m sincerely proud that RIAC was part of this equation. Businesses really need the credit support in Canada and in export markets. The Government’s swift response allowed the industry to move forward fast with an agreement. However, based on input from the market, including clients and insurance brokers, we recognize that we need to move faster to improve the credit capacity embedded within the TPI before it is too late. RIAC continues to receive feedback from member stakeholders, both insurers and brokers, and to work hard to improve the program so that it meets the needs of Canadian businesses.”