Cyprus Mail

Capital controls force credit insurers to review Greek cover

A woman walks by a graffiti in Athens

Credit insurers are reviewing their coverage of companies carrying out trade with Greece as a result of uncertainty over the solvency of Greek customers hit by capital controls, companies in the sector told Reuters.

Trade credit insurers are essential to the smooth flow of products and services between countries, since they protect exporters from the risk of buyers defaulting, becoming insolvent or going bankrupt.

But Greek companies and individuals are subject to severe constraints on moving funds after talks with the country’s creditors foundered earlier this week, making it far more risky to provide insurance that covers Greek importers.

“The capital controls imposed by the Greek financial decree mean payments by Greek importers to foreign suppliers are not possible,” said a spokeswoman for Euler Hermes, the world’s largest trade credit insurer.

This concern was echoed by smaller rival Atradius , which said it was concerned that Sunday’s referendum on whether Greece should accept bail-out conditions that were being discussed with its creditors earlier this week could drive Greece into a still deeper recession.

“Any valid claims we continue to cover,” said John Blackwell, a company spokesman. “We’ll have to wait to see what the outcome (of the referendum) is, and how we’ll respond.”

In a research note, Euler Hermes warned that the impact of capital controls was likely to be long-lasting. “It took Cyprus two years and Iceland seven years to revoke controls,” the company’s analysts wrote.

They added that particularly vulnerable sectors included machinery and equipment, oil and refined petroleum, computer and IT services and vehicles.

Both companies said their exposure to Greece was very limited, with Euler Hermes saying German exports to Greece had already fallen sharply and that the country was the destination for just 0.44 per cent of all German exports.

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