The export credit insurance scheme operated by the State has been withdrawn. With the growth of private sector schemes it has been dwindling in importance, and the withdrawal was not unexpected.

ISME has expressed disappointment at the withdrawal "without prior or proper consultation with industry". Conceding that there was a need to reform the scheme because it was "weighted in favour of big agri-business", ISME said it would have proposed an alternative structure which would have "supported exporting indigenous businesses and marginalised the potential cost to the Exchequer".

The original scheme was revised in 1991 following claims that the scheme had been abused by some beef companies. The old scheme was described by Mr Des O' Malley the then leader of the PDs, as a "licence to print money" in the context of insuring beef exports to Iraq. Goodman International still has a claim, against the Government (and others), for the return of around £85 million on beef exports to Iraq which was frozen by the Government in 1990. There are also counter claims by the State against Goodman.

The scheme restructured in 1991 involved the withdrawal from cover of short-term commercial risk. It continued, on a very selective basis, the provision of cover for short-term political risk, and medium-term commercial and political risk business. Ms Mary Harney, Tanaiste and Minister for Enterprise, Trade and Employment, had been reviewing the operation of the revised scheme introduced in 1991 and concluded it was no longer necessary.

"Essentially my review concludes that there is no longer any necessity to expose the State to significant and avoidable financial risks in the provision of export credit insurance" she said. "In the context of our booming export sector, State export insurance is a complete anachronism", Ms Harney also noted that the risk imposed on taxpayers from this insurance "is disproportionate to any benefit it gives to exporters".

Since the scheme was relaunched only 44 policies/ renewals were issued. The maximum potential exposure was £47 million and this is now down to £18 million. The State is understood not to have incurred any losses from the schemes. Premium income since 1991 amounted to just £1.5 million. Ms Harney stressed that "circumstances have changed dramatically over the past seven years. It would be completely unwise to continue to expose taxpayers under the scheme. Given that there is no spread of risk across a range of heading, it is debatable whether what we were offering could really be described as insurance in the real sense".

While admitting it served some purpose over the years, she could see no merit in its continuation. The withdrawal does not affect policies in existence. And the department said it would continue to pursue recoveries, claims and litigation.

The department reviewed the revised scheme last year. The brief was to establish if there was a need for State involvement. It concluded that there was not a reasonable spread of risk available to the State because such a small proportion of exports were covered. Even for markets where cover had been given, most of the sales were not covered by the State scheme. Most of the exports of client companies were not covered by the scheme.

The statement from the department of enterprise, trade and employment, also noted that the private market for short-term political risk cover has developed considerably since 1991.

Also, medium-term risk cover has not been essential for customers given their particular financing arrangements.