Brussels, 21.12.2010 C(2010) 9457 final

Subject: State Aid SA 32075 (2010/N) – Prolongation of the short-term export-credit insurance scheme

Sir,

I. PROCEDURE

1. On 13 December 2010 the Finnish authorities notified the prolongation of the short-term export-credit insurance scheme until 31 December 2011. Prenotification contacts took place on 15 November and 3 December 2010.

2. The original short-term export-credit insurance scheme (hereinafter referred to as "the scheme") was approved by the Commission on 22 June 20091.

3. The Finnish authorities exceptionally accept that the decision on the notified scheme be adopted in the .

II. CURRENT MARKET FOR SHORT -TERM EXPORT CREDIT INSURANCE IN FINLAND

4. The private insurance market in Finland is dominated by two international insurance companies: Atradius and Euler Hermes. No national private insurer provides credit insurance on the Finnish market.

5. According to the Finnish authorities both private players have indicated that neither the use nor the pricing of the scheme has created distortion of the market conditions. Furthermore, the insurance of small turnovers or single buyer transactions offered by the scheme is not considered as their core business.

1 State aid case N 258/2009, Official Journal C 227, 22.09.2009.

Ulkoministeri Alexander STUBB Merikasarmi PL 176, FIN - 00161

Commission européenne, B-1049 Bruxelles – Belgique Europese Commissie, B-1049 Brussel – België Puhelin: (32-2) 299 11 11

6. According to the Finnish authorities, the estimated range of the premium level of [0.1 – 0.5]% to [0.5-1.2]%∗ (based on the guaranteed turnover) from year 2009, charged by the private credit insurers in Finnish market, is still valid.

7. According to the Finnish authorities in the context of the crisis, the private credit insurance companies have not yet been willing to restore the pre-crisis credit limits, even if this unavailability is not always justified by an increase in the underlying risk of the insured operations. Therefore, the exports have been left without private cover in markets where they have traditionally been able to rely on credit insurance.

8. The Finnish authorities have submitted extensive evidence of insurance cover unavailability for short-term export credit from well-established exporters, which represent various market sectors. Each piece of evidence demonstrated lack of cover for transactions relating to a number of EU and high-income OECD countries. In this context, the Finnish authorities intend to supplement for the lack of cover by providing short term export insurance through State agency Finnvera.

III. DESCRIPTION

3.1 Scheme

9. The purpose of the Finnish measure is to provide short-term export-credit insurance coverage to Finnish exporters who are confronted with temporary unavailability of cover in the private market for financially sound transactions with certain countries2 as a result of the financial crisis.

10. The Finnish authorities seek to prolong the existing scheme until 31 December 2011. Finland does not intend to make any changes to the material provisions of the scheme. All terms of the scheme will thus remain as approved by the Commission in the original decision.

11. In line with the Communication of the Commission pursuant to Article 93(1) of the EC Treaty applying Articles 92 and 93 of the Treaty to short-term export credit insurance3 (hereinafter the "Communication") and the Communication on the Temporary framework for State aid measures to support access to finance in the current financial and economic crisis4 (hereinafter the "Temporary Framework"), which was prolonged by the Commission until 31 December 20115, the Finnish authorities provided new information on the temporary unavailability of cover for marketable risks by means of evidence provided by well-established exporters.

∗ Confidential information 2 EU and OECD countries, listed in the Annex to the Communication of the Commission pursuant to Article 93(1) of the EC Treaty applying Articles 92 and 93 of the Treaty to short-term export credit insurance. 3 OJ. C 281, 17.09.1997, p.4-10. 4 OJ C 16, 22.1.2009, in particular point 5.1. 5 Communication of the Commission of 1 December 2010 on "Temporary Union framework for State aid measures to support access to finance in the current financial and economic crisis", not yet published. 2 3.2 Use of the scheme

12. The scheme has been actively used by the exporters in Finland. The exports covered by the scheme since its introduction amounted to EUR 173 million (export turnover that the exporters have declared under the credit limit) by 30 November 2010. The applications where cover has been denied amounted to EUR 21 million and applications have been withdrawn (cases never materialised into offer) amounted to EUR 25 million.

13. According to the information submitted by Finland, 85 % of the cover granted under the scheme was priced in the second premium category with applicable premiums ranging from 0.4 % to 1.0 % p.a. depending on the duration of the contracts6.

14. There has been demand for almost all the marketable risk countries, 32 altogether. The most active markets are UK, , Sweden, Spain, France and USA. As regards sectors, exports connected to construction and wood production accounted for the largest part of the credit limits granted under the scheme. The breakdown per sector and country of the limits granted under the scheme are representative of the structure of Finnish exports.

15. By the end of September 2010 five applicants for claims have been filed, amounting to EUR 485 161. Two of these have been withdrawn. Two claims amounting to EUR 214 156 have been paid.

16. The Finnish authorities committed to provide the Commission with a report on the functioning of the scheme by the end of year 2011.

IV. ASSESSMENT

17. In its decision of 22 June 2009 the Commission examined the notified scheme pursuant to the Communication and the Temporary Framework and considered the notified measure to be compatible with the internal market until 31 December 2010. To this end, the Commission had assessed the unavailability of cover in the private insurance market, the application of the escape clause and alignment of premium rates with rates charged.

18. In views of the extensive evidence on refusals to grant limits by private insurers provided by Finland, the Commission considers that the exceptional circumstances at the origin of the notified measure still persist and therefore recognises the need for the prolongation of the scheme. The updated evidence in form of refusal of cover from well- established exporters covers different industrial sectors and regions in Finland. The Commission, therefore, consider the evidence as sufficient to demonstrate unavailability of private cover under the Temporary Framework for a significant part of the market as according to the Communication and in particular point 4.4, risks incurred on debtors established in countries listed in the Annex to the Communication7 are considered temporarily non-marketable only if it can be demonstrated that private insurance cover for the risks generally viewed as marketable is unavailable in certain Member States. The Temporary Framework simplifies, until 31 December 2011, the proof that Member States need to produce to demonstrate the unavailability of cover.

6 A detailed description of the pricing under the scheme is explained in the original decision of 22 June 2009 in paragraphs 23-26. 7 The list includes EU and OECD countries. 3 19. The pricing of the scheme remains in line with the pricing of the market, according to the most recent data provided by Finland, see point 6 and 13 above. Most of the cover granted was priced according to the second risk category between 0.4 % and 1.0 % p.a. as compared to a lower market price range of [0.1-0.5]% to [0.5 – 1.2]% p.a.

20. The Commission positively notes that the claims history demonstrates that the risk of covering financially unsound transactions under the scheme, which would not be able to obtain insurance cover even in the normal market conditions, is kept low.

21. On the basis of the above, the notified prolongation of the scheme does not alter the Commission's previous assessment in the decision 22 June 2009. The Commission therefore concludes that the scheme continues to meet the requirements of the escape clause of the Communication (point 4.4) and the evidence is in line with the Commission’s temporary framework for state aid measures, which gives Member States additional scope to facilitate access to financing in order to assure a gradual recovery from the present economic and financial crisis.

V. DECISION

The Commission has accordingly decided to consider the notified measure to be compatible with the internal market until 31 December 2011.

The Commission notes that for the reason of urgency Finland exceptionally accepts the adoption of the decision in the English language.

For the coming year in which the measure is implemented, Finland will submit at the end of the year a report on the development of market conditions and on the use of the scheme.

If this letter contains confidential information, which should not be disclosed to third parties, please inform the Commission within fifteen working days of receipt. If the Commission does not receive a reasoned request within that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site http://ec.europa.eu/community_law/state_aids/state_aids_texts_fi.htm

Your request should be sent by registered letter or fax to: European Commission Directorate-General for Competition Directorate for State Aid State Aid Greffe B - 1049 Fax No: +32 2 296 12 42

Yours faithfully, For the Commission

Joaquín ALMUNIA Vice-President

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