Euler Hermes, which is majority owned by the German insurer Allianz, is acting on fears that the stricken eurozone member may be forced out of the single currency, limiting the ability of Greek importers to pay their bills reports The Telegraph.
“Euler Hermes has decided no longer to cover deliveries to Greece for the foreseeable future,” a spokesman said.
The company said existing contracts would be honoured but no new Greek business would be underwritten. The insurer said it would reconsider its decision “as soon as the situation improves.”
The move reflects the widely-held view that Greece is likely to exit the eurozone, after politicians failed to form a coalition government, prompting a second election on June 17.
The fear is that Greece will elect politicians unwilling to press ahead with the scale of austerity demanded by fellow eurozone members and the International Monetary Fund as a pre-requisite for continued bail-out funds, hastening an exit from the single currency.
“It’s a watershed – everyone’s watching what happens and trying to make contingency plans,” said Richard Talboys, head of political and trade credit risk at insurance broker Willis.
“There are smoke and flames coming out of Greece but we don’t know if it can be put out, or if the Greeks will pour oil on it by voting against restructuring and austerity.”
Greece is not the only country vulnerable to such action. Trade credit insurers have also been gradually cutting their exposure to Spain and Italy.
Insurers were criticised at the outset of the financial crisis in 2008 for suddenly withdrawing cover, interrupting supply chains and forcing several European governments to intervene with state-backed insurance schemes.