May 2020 COVID19 Your Broker Help Guide May

May 2020 COVID-19: Your Broker Help Guide

May 2020 COVID-19: Your Broker Help Guide You will have certainly already received articles about COVID-19, we won’t add more. The goal of this short document is to help you manage your Trade Credit Insurance Policy during this period and to assist you in avoiding mistakes in your Policy administration by warning you about special topics you should pay attention to. For any questions or doubts you may have, do not rely solely on the general information you may have received or read on Insurers’ websites. Due to the current circumstances, Insurers opt for global communication. But you’re not global. You are unique. Your contract might be special, different, tailor-made. For any questions please don’t hesitate to contact us The 630 ICBA Specialists , one of the two largest Trade Credit Teams in the world, are at your disposal to help and support you. Anytime, anywhere on the planet, we are here, for you. . . © ICBA : International Credit Brokers Alliance

COVID-19 Your 7 Key Questions… 1. I have heard credit Insurers grant some special flexibility in their policies due to the Covid-19 situation. Should I be concerned by this? 2. Am I properly insured for my exposure under my present Policy? Is there a risk of cover exclusion in my contract wording due to Force Majeure or natural disaster and Governmental decisions? 3. Will I face massive limits reductions and cancellations from Insurers, as occurred during the Great Recession 2008/2009? 4. I’ve heard about some Governmental support schemes. Can I benefit from them and how? 5. If I lack cover, compared to my present needs, what alternative can be offered to me? 6. What are the macro-economic expected consequences, according to credit Insurers? 7. How can my Broker help me to get through this difficult period and prepare for the recovery? © ICBA : International Credit Brokers Alliance

Q 1 Your Q & A : 1 I have heard credit Insurers may grant special flexibility in their policies due to the COVID-19 situation. Should I be concerned by this ? Our Expert Answer • Insurers have communicated directly to their insured about their special COVID-9 measures, via post, mail, portal, customer services. These measures will vary from insurer. • Most of them have extended the period before you have to report to them an overdue - or declare a claim - by 30 to 60 days. Some Insurers have also agreed to extend the Period of Cover, meaning to also extend the date of Stop Cover: covering you for a longer period of invoicing. • Be careful, the Stop Cover date stays unchanged with most Insurers. It can also depend on your contract issuing country and your Buyer country. Be sure to check this. • Furthermore, have in mind that the Insurers’ decisions don’t automatically apply to your fronted policies. For international programs where the lead underwriter would use a Fronting partner, in some cases, they may not be obligated to accept such changes. • Other clauses of your Policy will likely remain unchanged. For instance, some Pending Orders Cover or Delayed Effect clauses are sometimes subject to “no overdue > X days” on the Buyer. • This means, Pending Orders Cover or Delayed Effect Facility will become not applicable in many cases, for the up-coming credit limits reductions or cancellations due to the increase of overdues. © ICBA : International Credit Brokers Alliance

COVID-19 Your Q & A : 2 “Am I properly insured for my exposure under my present Policy? Is there a risk of cover exclusion in my contract wording due to Force Majeure, natural disaster and/or Governmental decisions? ” Our Expert Answer The answer is: IT DEPENDS. 4 possible situations: • • Wording of your Policy’s General Conditions (one insurer can have different wording depending on the Policy type) Wording of your individual contract’s particular conditions Laws governing your Credit Insurance Policy Legislation regarding your sales contract The essential basis for all potential claims cases is that the supplier and Policyholder hold an undisputed and confirmed unpaid debt against the Buyer (in case you benefit from Protracted Default Cover i. e Non-Payment of the debt, when the Buyer is still solvent). It is important to strictly follow the Policy terms and conditions, especially regarding notification of adverse Buyer information on potential claims cases, such as becoming aware of a companies' application for a Governmental support scheme. In some cases, the cover may depend on the underwriter‘s interpretation of the situation and wording. The wording of your Policy’s General Conditions stipulated exclusion of cover in case of: Force Majeure , natural disaster, Governmental decision. Insurers have acknowledged to The ICBA in writing © ICBA : International Credit Brokers Alliance

“Force Majeure is a legal term, which has different meanings in several legislations, and we cannot make a general statement here. As in the past we will assess every claim in a professional and reasonable manner. ” Atradius Global. Atradius did not provide an answer for “domestic” policies. or provide explicit reasons to decline non-payment claims cases under COVID-19 in Global policies. Less obvious in the “domestic” one’s. To be confirmed. “Our cover would apply, subject to the General terms of the Policy. In the case of Insolvency or Protracted Default in case these situations are the result of the present situation. Force Majeure is not a concept that exists under our Policy and does not interfere the relationship between Coface and the Policyholder”. Coface Group “We do not see COVID-19 as a natural disaster or Force Majeure event (nor have we ever). EH World Agency “COVID-19 triggered claims cases are neither political risk claims cases, nor does Euler Hermes see a Force Majeure option to decline claims’ payments. ” EH Germany Lloyd’s has confirmed “full cover under the Policy terms and conditions for insolvency and non-payment cases for all commercial risks, triggered by COVID-19 reasons and Governmental actions “ © ICBA : International Credit Brokers Alliance

COVID-19 Your Q & A : 3 ” Will I face massive limits reductions and cancellations from Insurers, as occurred during the Great Recession of 2008/09? ” Our Expert Answer • Even if this situation is different, let’s first review the 2008 -2009 crisis. Credit Insurers are easily scape-goats during economic crisis, as people get stressed by a violent drop in sales. • In 2008 -2009, credit limits granted by 4 out of the 5 top worldwide credit Insurers dropped less than the insured sales. This means, during the crisis, there was more cover granted, for € 1 premium, than before the crisis. The main problem was the drop in sales, not the credit Insurers adjustments. Limits do not create orders from your clients. • During this crisis, the worldwide Top 3 Insurers (Euler Hermes, Atradius, Coface) maintained € 1. 300 billion of limits, including € 200 billion on NIG (Non-investment grades Buyers, which banks stopped financing). They have cut -15% of their total on average, even if this has been > 30% in some countries or sectors. • A bias of perception always underestimates the risks supported by Insurers. It is tempting to share the reproach “they run away and keep only nonrisky business at the moment we need them”. Tempting, but wrong. Those “Big 3” Insurers paid almost € 8 billion of claims in 2008 -2009, (compared to 1. 8 billion in 2007). Despite reinsurance, they had hundreds of millions of losses during those years. They played their role. We pushed for it. What will really happen to your limits in 2020 ? © ICBA : International Credit Brokers Alliance

“What will really happen to your limits in 2020 ? ” Our Expert Answer As of January 1 st, 2020, before COVID-19, the big 3 Insurers granted € 2, 200 Billion of credit limits worldwide. Don’t think such players can “run away” from the risk. They will pay and they will certainly face huge losses. Limits will necessarily be adjusted by all Insurers worldwide, as needs will decrease with lower sales volumes due to recession and increased bankruptcies. There are two key drivers for those risk adjustment plans: expected increases in bankruptcies and Government supports (refer to slides on the next page). The next factor is the intensity and the process. We potentially face three different situations for such State support: 1) Countries where Governments have granted strong reinsurance of the losses, like in Germany (€ 30 billion guarantee given by the State, after first 5 billion of losses paid jointly with the Insurers). This German model is expected to be spread to the majority of Europe, with the exception of France. In such cases, fewer credit limit withdrawals and cancellations will happen. We expect less than 5% of the total limits granted in the countries to be impacted, (except Italy where it would be more, but the “exercise“ has already been implemented). This stability in part due to benefit of individual State guarantee schemes. 2) Countries where Governments reinstall the CAP/CAP+ system adopted in 2008. France is the only significant case known as per today. There will be more limit reductions and cancellations. But € 10 billion will be for transfer to CAP/CAP+ State secured guarantees (+5 for exports). Granted limits from the top 3 Insurers are around € 320 billions on French Buyers. Cumulated drop of used limits is expected to be below those € 10 billion. In other words, limits cuts will fully be a possible transfer to State support. 3) Countries with no direct Governmental supports to Credit Insurance (Brazil, Mexico, USA, Greece) announced that they will suffer more restrictions on limits. Insurers have learned from 2008. They will be more selective in their risk action plans. They will be sharper than in 2008 in some sectors more impacted by the virus (transportation, automotive), but less for others. Also, the expected increase of bankruptcies differs by country (see their revised analyse) Insurers have increased consultation with Brokers, since 2008, in an effort to reduce dissatisfaction, and the perception that actions have been implemented by “a machine” The ICBA is in regular contact with Risk Underwriters via weekly virtual meetings with Insurer’s Boards members and their group Risk Directors in order to stay ahead of developments. ICBA is also closely monitoring all additional sources that influence trade credit and its risk mitigation options, such as Export Credit Agencies and governments offering supportive schemes. Please contact us with any special questions.

COVID-19 Global Insolvencies © ICBA : International Credit Brokers Alliance

COVID-19 World Bankruptcies Growth Between March 20 th April to April 9 th March 20 th from 10% to 25% April 9 th © ICBA : International Credit Brokers Alliance

Limit Reductions & Cancellations: The Grey Zone You Never Hear About. . . • Insurers frequently refer to increases in bankruptcy numbers, but they seldom impact our client’s and insured's businesses. The reason is that the majority of the crisis “victims” are mainly hotels, restaurants, bars, individual companies. This is not the core profile of Buyers from credit-insured suppliers. • We will carefully follow during coming months, the number of bankruptcies with businesses > 5 m€ sales, with special focus on those > 50 m€ sales and those businesses severely hurt by bad debts and jobs lost. • Of note, when the big 3 Insurers commit with Governments to minimize the reduction or cancellation of the existing ~ € 2. 2 billion credit limits approved, they do not reference all other cover in place approved under various methods : blind or unnamed cover, self-underwriting or consultation zone, discretionary credit limits, etc. • We estimate that there is approximately an additional € 600 billion in cover granted in these various ways. These limits are not visible in the insurer’s IT systems. • In this way Insurers may delete an estimated additional billion Euros of limits covered using these discretionary methods. They can achieve this, without reducing any credit limit approved, making thousands of Buyers not covered any longer under Discretionary Credit Limits based on Grade, Score or Rating. It is unknown if these figures are reported to their respective Governments. Be confident that your ICBA Broker is constantly pushing Insurers to ensure more transparency on this and support you to avoid such phenomena. © ICBA : International Credit Brokers Alliance

COVID-19 Your Q & A : 4 I’ve heard about some Governmental support schemes. Can I benefit from it, and how ? Our Expert Answer As presented on the previous page, the type of scheme varies country by country, insurer by insurer. To take France as an example: • Common meetings and calls took place between credit-Insurers & the Minister of Finance. • Euler Hermes, Atradius, Coface, AXA, Credendo, and Groupama participated. • Not invited to participate : AIG, QBE, Zurich. • All participants had decided to benefit from the State support via CAP/CAP+ system with the exception of Credendo who declined in France for various reasons. • Nevertheless, Credendo and/or those who did not participate in the meeting in France may accept public support schemes in other countries. The best way to know if your Insurer and Policy is eligible for possible public support, in the country where your Policy is issued is to ask your local ICBA Broker. To know more about financial Governmental support, in any country in the world, click here 30% Countries GDP > 1 Trillion $ 25% (excluding USA (11, 8%) & China (3%) ). Source : ICBA & IMF 20% 10% 5% 0% 1 000 2 000 3 000 4 000 5 000 2 Types of support : Direct State support to economy (blue) + Bank loans Guarantee by State (total in green) EU 27 : 550 b$, 4% of EU 27 GDP © ICBA : International Credit Brokers Alliance EU 27 average 15%

COVID-19 Your Q & A : 5 If I lack cover, compared to my present needs, what alternative can be offered to me ? Our Expert Answer The timing is not appropriate for a move from one insurer to another one. Several Insurers have temporarily stopped accepting new applications. Everyone is focused on servicing existing clients There is still some possibility to sign new policies today. Whether to become insured (including extending insurance to more sister companies, expanding the Policy to more countries) or to change Insurers. There are other options to address the need for increased Buyer limits. The alternatives we recommend are: Top Up Co-insurance Single Buyer Cover Even though these solutions are not necessarily available in your country or on your continent, it does not mean you can’t benefit from them. Ask your ICBA Broker. They may be able to provide you with an innovative solution imported from abroad using the ICBA network. Contact Us Please visit www. ICBA. com for contact details for your local office © ICBA : International Credit Brokers Alliance

COVID-19 Your Q & A : 6 What are the macro-economics expected consequences, according to credit Insurers ? Please click the below links to some Insurers Analysis Global Economic Outlook COVID-19 in USA A sudden surge in business solvencies Atradius Economic Update April 2020 © ICBA : International Credit Brokers Alliance Crisis and Emerging Markets

COVID-19 Your Q & A : 6 Extract. GDP: A Rapid Deterioration March 20 th April 9 th © ICBA : International Credit Brokers Alliance

COVID-19 The Great Lockdown: Twice as Bad as The 2009 Global Financial Crisis May 6 th We expect the supply and demand shocks, especially through confinement measures, to push the global economy into recession in H 1 2020 (4 x the trough seen during the global financial crisis). We expect a U-shape recovery thereafter, supported by stimulus measures © ICBA : International Credit Brokers Alliance

COVID-19 Despite Unprecedented Support, Insolvencies are Set to Increase by +20% in 2020 May 6 th We find that more than 13, 000 SMEs & Mid. Caps (7% of total) in the six biggest Eurozone countries are at risk of going bust after persistent low profitability and turnover growth. We find that more than EUR 500 bn of turnover (or 4% of Eurozone GDP) could be at risk. Final figures still depend on (i) the timing and magnitude of other Policy measures yet to announced and (ii) the potential closures of business courts (which would create lags and delays in official registrations of liquidations and restructuring procedures). Contact Us Please visit www. ICBA. com for contact details for your local office

COVID-19 Your Q & A : 7 ”How can my ICBA Broker help me to get out of this difficult period and prepare for the recovery? ” Our Expert Answer Hopefully this guide has been informative and helpful. Your ICBA Broker will invest the time to collect market intelligence from Insurers for you, adding to your comprehension and management of the actual situation. Your ICBA Broker can remind assist you with focusing on today, before anticipating tomorrow. Insurers change their risk perception every week based on the information they get and the overdue and claims level they observe. Government support schemes are also evolving in some countries. No one currently knows what tomorrow will look like so take care of what you can today in preparation for tomorrow. Finally, ICBA Brokers will continue to accumulate experience and information in the coming weeks on: limits reduced, claims declined, contract changes imposed by Insurers. . Despite being very experienced and leading experts in our industry, the current world situation we face is unprecedented. Our response to your situation and your questions might be different and better next week than today. Don’t take today’s information for granted for the next 3 months. Come back to your local ICBA Broker anytime you have a question or a doubt. All ICBA Brokers share a unique database of worldwide information and best practices, regarding COVID-19, as well as other issues, which is updated weekly and during these unprecedented times, often daily. The ICBA Executive Board has direct contact with Insurers group decision makers and Board members plus all local contacts in our 45 countries. communication is frequent, regular and ongoing so we can be positioned to provide our clients with the most relevant and up to date information possible.

COVID-19 Disclaimer The information contained in these documents is confidential, privileged and only for the information of the intended recipient and may not be used, published or redistributed without the prior written consent of the Executive Committee of The ICBA. The opinions expressed are in good faith and while every care has been taken in preparing these documents, the ICBA makes no representations and gives no warranties of whatever nature in respect of these documents, including but not limited to the accuracy or completeness of any information, facts and/or opinions contained therein. The ICBA, its Partners, the Directors, Employees and agents cannot be held liable for the use off and reliance on the opinions, estimates, forecasts and findings in these documents. If you have any questions, please visit www. icba. com for more information