UK Export Finance (UKEF) has expanded its insurance policy to cover trade with a range of major markets, including the US and every EU member state, in response to the Covid-19 crisis.

A spokesperson for UKEF, the UK’s export credit agency, says its export insurance policy is usually only deployed for trade in markets deemed too high-risk or high-cost for the private sector. But according to an announcement by the agency last week, the policy is now available for transactions with Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland and the US, as well as all 27 EU countries.

“Exports from the UK to these markets totalled £499bn last year, accounting for 74% of all international sales from the UK,” it says.

“UKEF will help companies concerned about the impact of coronavirus to export with confidence, by offering insurance that can cover up to 95% of the value of an export contract. The insurance will protect against the risk of non-payment should UK exporters’ customers become insolvent or their government actions make fulfilling the contract impossible.”

The spread of Covid-19 is having a widespread effect on international trade, with a slowdown in shipping accompanied by a greater squeeze on corporates’ and financial institutions’ working capital.

UKEF says the pandemic “is expected to put pressure on the ability of exporters to agree payment terms, while commercial credit insurance may become harder to obtain”. By insuring through the public sector, it says suppliers can offer greater flexibility to overseas buyers.

The decision follows moves by the European Commission to liberalise EU-wide state aid rules, still applicable in the UK during this year’s pre-Brexit transition period.

The Commission announced on March 27 that it had opted to make short-term export credit insurance more widely available, following an emergency short-term consultation earlier that same week.

The reforms effectively relax EU state aid rules set out in 2012, which designate the nine markets listed by UKEF as “marketable risk countries”, meaning the amount of support that can be provided by public agencies is restricted.

Margrethe Vestager, the European Commission’s executive vice-president and leader of its competition division, said that the time: “Managing the economic impact of the coronavirus outbreak requires us to act fast. Today, we adopted a comprehensive solution for short-term export-credit insurance.

“We are working with member states to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.”

It is so far unclear which EU member states also plan to avail of the new-found flexibility on export insurance cover. As of press time, few other export credit agencies have responded publicly.

In Denmark, an EKF statement issued on April 6 in response to the announcement says its reinsurance scheme “has been extended so that it also covers countries within the OECD and the EU where the customers of Danish exporters are struggling with their liquidity”.

“At the turn of the year, we were full of optimism, but that optimism has suddenly been replaced with uncertainty, liquidity problems and lay-offs among Danish businesses,” adds chief executive Kirstine Damkjær. “During times like this, EKF will live up to its responsibility for providing those businesses with the security they need when the commercial banks become reluctant to lend them money.”

Austria’s OeKB has acknowledged the European Commission’s announcement and says it is in “discussions with private credit insurers active in Austria”. “The aim is to ensure that these continue to maintain their proven revolving cover and that the Austrian export industry is able to do business abroad despite the challenging circumstances,” it says.

Several export credit agencies have taken separate steps, including a move by Poland’s Kuke to expand political and commercial risk cover to 100% for export transactions with repayment terms of over two years.

The move is also separate from calls by the British Exporters Association (BExA) for UKEF to “take the lead” and request rule changes at OECD level that would allow it to increase its cover from 85% to 100% cover for transactions involving developing markets.

A spokesperson for BExA tells GTR that the new initiative “is clearly a positive announcement”, but adds: “The question now is whether UKEF will have the resources and staffing to put this into practice, particularly if it results in a significant increase in enquiries.”

The association produces regular benchmarking reports assessing UKEF’s work, and has long raised resources as a potential issue. In its most recent report, dated October 2019, BExA says engagement with exporters has improved significantly but that “delegated decision-taking and simpler processes and wordings would help UKEF’s overall accessibility”.

Gabriel Buck, managing director of consultancy firm GKB Ventures, says that when it comes to supporting UK exporters “every little helps”. However, he suggests it is likely the private insurance market “is still able and willing to cover developed market risk”.

“This announcement doesn’t address the main problem: how to support developing markets, and how to cover the remaining 15%. Most of what UKEF does is in the developing markets where, today, there is so much volatility,” he tells GTR.

But Robert Keen, director of the British International Freight Association says the decision is “welcome news” for its members. He adds: “If UK exporters are protected, that should have a knock on effect on the freight forwarders that many exporters rely upon to provide logistics services.”