German insurers in 'final stages' of credit backstop extension talks

LONDON/FRANKFURT (Reuters) - German insurers are in the final stages of negotiating a six-month extension to a COVID-19 credit insurance backstop with the German government.

Insurers and the government struck a deal earlier this year for up to 30 billion euros ($35.64 billion) in guarantees for the commercial credit insurance industry for 2020, a move important for fostering the smooth flow of trade during the pandemic.

With 2020 winding down, Joerg Asmussen, head of the GDV German insurance association, said an agreement for the extension could be reached "within days".

"We are very constructively negotiating currently between the relevant government bodies, the ministry of finance and the ministry of economy," Asmussen told the Reuters Events Future of Insurance Europe conference.

In return for the guarantee, credit insurers pledged to pay two thirds of their premiums to the government this year.

That rate is now up for discussion in the renegotiation, Asmussen said, "given that we have seen very little insolvencies so far".

Credit insurance helps to ensure the smooth flow of trade in goods at home and abroad, especially in the retail sector, protecting suppliers against the risk that customers cannot pay.

Discussions over proposals by insurers for a separate pandemic fund in Germany, which would help companies deal with business interruptions from future pandemics, are still ongoing, Asmussen said.

Talks have shifted to the back burner given next year's national elections. Such a fund would serve as quick liquidity help for companies until government emergency measures could be hammered out.

Asmussen also said insurers should be permitted by regulators to pay out dividends if they were in a sound capital position.

($1 = 0.8417 euros)

(Reporting by Iain Withers and Tom Sims, Editing by Carolyn Cohn and Maria Sheahan)