Law360, London (June 2, 2021, 5:00 PM BST) -- The European Commission approved on Wednesday an €800 million ($976 million) insurance scheme that will protect Polish businesses if customers cannot pay them amid the coronavirus pandemic.

The European Union's executive arm said it has approved the domestic trade credit insurance scheme under the bloc's rules on state aid. Trade credit protects companies supplying goods and services against the risk that their clients will not pay up. Claims typically arise when there are widespread insolvencies.

But private insurers are now more reluctant to offer the cover to Polish companies because of the uncertainties caused by the coronavirus outbreak, the commission said. The scheme will allow the Polish government to pay out approximately €800 million in trade credit claims to ensure that the cover continues to be available to businesses during the pandemic.

The program will also prevent buyers of goods or services from having to pay companies in advance, which will free up liquidity, the commission said.

"The commission found that the scheme notified by Poland is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state," the authority said on Wednesday.

The EU executive can approve state aid measures in member states to fix a disturbance to a country's economy. The British government established similar measures in June 2020, providing £210 billion ($298 billion) of insurance to domestic businesses during the pandemic. HM Treasury said it will end its domestic trade credit insurance scheme at the end of June.

--Editing by Joe Millis.

For a reprint of this article, please contact reprints@law360.com.