Commission approves Lithuanian short-term export credit insurance scheme

The European Commission has authorised, under EU State aid rules, a measure adopted by Lithuania to limit the adverse impact of the current financial crisis on exporting firms. The Commission found the measure to be in line with its Temporary framework for state aid measures to support access to finance in the current financial and economic crisis. In particular, the measure requires a market-oriented remuneration and concerns insurance cover that is currently insufficient on the private market. The Commission authorised the measure until 31 December 2010.

Competition Commissioner Neelie Kroes said: “The Lithuanian scheme provides export firms with the insurance cover they need and, at the same time, the top-up mechanism and the level of premium ensure that private market players cannot be crowded out and thus distortions of competition are minimized”.

Under the notified scheme, the Lithuanian State-owned company INVEGA would provide additional short-term export-credit insurance coverage to companies established in Lithuania which are confronted with temporary insufficiency of cover in the private market. Only financially sound transactions would be eligible for support under the scheme. INVEGA´s share of the cover will not exceed 50% of the total cover and the exporters will have to retain the responsibility for at least 20% of the underlying risk.

The Commission concluded that the measure complies with the conditions laid down in the Temporary framework for state aid to business during the crisis. In particular, the measure meets the following criteria:

sufficient proof has been provided that the necessary cover has become insufficient on the private insurance market as a consequence of the financial crisis;

premiums required by IVEGA are aligned at those of the private credit insurance market and are thus in line with the Commission's Communication on short-term export-credit insurance. The premiums are set at a level that provides an incentive for exporters to have recourse to private insurers once there is again sufficient cover on the private market.

Moreover, the measure provides safeguards ensuring that financially unsound transactions and counterparties, that would not obtain cover even under normal market conditions, do not unduly benefit from the measure.