In 1997 the EU Commission has adopted a Communication defining certain short term risks as marketable risks. According to this Communication the mentioned risks shall not be insured by a public insurance institution, but by the privat insurance market.
In intra-Community trade as well, officially supported export credit insurance can distort competition. This occurs when publicly supported export credit insurance institutions are accorded advantages over their private-sector peers. According to Articles 87 and 88 of the Treaty Establishing the European Community, aid provided by governments or from public coffers can distort competition and violates the rules of the Common Market.
Defining marketable risks
Such distortions of competition may, in the view of the European Commission, occur in the area of short-term marketable risks. The Commission dealt with the subject of short-term export credit insurance EU-wide in a June 1997 communication to member countries that became effective on 1 January 1998. After studying the relevant capacity of the private insurance market, the Commission expanded the scope of application of the communication with effect from 1 January 2002, primarily by broadening the definition of marketable risks. In order to underline the significance of SMEs, the communication was again adapted as at 1 January 2006.
Marketable risks are defined as
- commercial and political risks (excluding catastrophe risks) that arise from
- transactions with borrowers/guarantors in any EU country and in the OECD countries Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland and the USA and that
- involve a risk period (i.e. manufacturing lead time plus credit period) of less than two years.
All other risks remain classified as non-marketable.