Trade credit insurers are withdrawing their support to companies that export to Ukraine and Russia as the war between the two countries escalate.
Due to the risk of sanctions, high claims or missed payments, trade credit insurers are willing to step down to covering businesses that export to both countries, industry sources told Reuters.
Trade credit insurance is an insurance policy that helps businesses to protect their accounts receivable from loss due to credit risks such as protracted default, insolvency or bankruptcy.
It is a type of property and casualty insurance that is provided by private insurance companies and governmental export credit agencies.
The latest action by trade credit insurers will increase pressure on Russia’s economy, which is already suffering due to Western sanctions and shuttering of operations by multiple companies.
In a statement quoted by Reuters, insurance broker Marshcredit specialties global leader Nick Robson said: “In this last week, trade credit insurers will have paused supporting new risk for Ukraine and Russia.”
Leading private sector European trade credit insurers consist of Allianz’s Euler Hermes, Atradius, and Coface.
Non availability of trade credit insurance is expected to have a significant impact on food, textile and electronic importers of both countries, in addition to delivering products to the Ukrainian agriculture or Russian energy sectors.
Insurers will also focus on controlling new business to restrict conducting business with sanctioned entities, said industry sources reported the news agency.
The companies in Ukraine purchasing goods from Western nations are anticipated to be defaulted on payments, as a result of the physical and economic impact of the war. It will increase complications for trade credit insurers.