Credit insurers under tough new rules to secure backing

French finance minister Christine Lagarde yesterday said the French state reinsurer Caisse Centrale de Reassurance will guarantee credit cover for some companies, while imposing tough rules to stop credit insuresr pulling future cover.

The state will guarantee up to 50% of the risk to a supplier offering credit to its customers if insurers aren't willing to cover 100%, Lagarde said at a press conference on the reform of credit insurance mechanisms.

Companies would pay for the guarantees through higher premiums. "The intervention of the Caisse Centrale de Reassurance will be at slightly higher premiums (than the market price)," Lagarde told reporters.

The finance ministry says credit insurers cover around €320bn (£268bn) of inter-company loans in France. This is about a quarter of the total credit suppliers give their customers.

The FT reports that under the deal credit insurers must give more notice of withdrawing cover and provide the reasons. Contested decisions will go before a government mediator.

It quotes Laurence Parisot, head of the French employers’ body Medef, as saying that changing the way credit insurers treated companies was more important than state-backed insurance because withdrawals of cover could have a “tragic impact on businesses and trigger a chain reaction”.

The FT claimed the CCR will guarantee only €5bn in extra cover over the next six months, but that it believes this will replace a lot of cover withdrawn by the private sector.

The price will be 1.2% of the total credit covered plus fees, it is roughly 50% higher than that charged by the private sector, the FT said.