German state export credit guarantees, the so-called “Hermes coverage” with which the German government protects German exporters from payment defaults abroad, increasingly have to jump in to cover for economic damage. Business, not political problems seen as key reason for failure to pay. The costs for the government and the affected companies are much higher than in the case of political damages, according to credit insurer Euler Hermes.
The government has commissioned Euler Hermes, an Allianz subsidiary, and PwC Deutsche Revision with the management of its export credit guarantees, an instrument it has used to promote foreign trade since 1949. While the overwhelming share of damages until 1997 was due to political reasons such as a currency shortage, unrest or payment prohibitions, economic reasons such as a customer's refusal to pay or insolvency have
now moved to the forefront.
