Certainty over payments
Firms given £10bn trade credit insurance guarantee
Firms have been given ‘peace of mind’ to continue trading says minister
The UK government has guaranteed up to £10 billion in trade credit insurance schemes which protect businesses against defaults or payment delays.
The Trade Credit Reinsurance scheme has been agreed following extensive discussions with the insurance sector.
The guarantees will support supply chains and help businesses during the coronavirus pandemic to trade with confidence.
Business Secretary Alok Sharma said: “Trade Credit Insurance is a daily necessity for hundreds of thousands of businesses across the UK – particularly those in non-service sectors such as the manufacturing and construction sectors.
He said the guarantee would give “peace of mind” to businesses, allowing them to continue to trade and maintaining liquidity in supply chains. This reinsurance scheme is an important step as we carefully set about firing up our economy as we emerge from the pandemic.”
British Chambers of Commerce director general Adam Marshall said: “This reinsurance scheme is an important step as we carefully set about firing up our economy as we emerge from the pandemic,” he said.
Allie Renison, head of trade policy at the Institute of Directors, said: “To help the economy get up and running again, maintaining confidence in supply chains is crucial, and we are encouraged to see this come as the product of collaboration between government and industry,”
Trade credit insurance underwrites an estimated £350 billion of economic activity of more than 630,000 businesses in Britain each year.
Insurers have until 15 June to formally indicate that they wish to participate in the scheme, which will be backdated to 1 April. The scheme will run until 31 December 2020, with a review on potentially extending it taking place at the end of September.
Under this temporary scheme, the Government will act as a reinsurer to the trade credit insurance industry, sharing the risk of losses arising from business insolvency with insurers.
Under this scheme insurers will take 10% of claims that result from business failure while government will take 90% of the premium and claims.
James Dalton, director, general insurance policy at the Association of British Insurers, said: “We welcome this temporary scheme, which reflects the pivotal role of trade credit insurance in helping businesses to recover from the unprecedented effects of the Covid-19 crisis.
“Since we alerted the Government of the need for it, we have worked closely with them to make it a reality. Maintaining cover as far as possible between suppliers and their clients will be a key component in allowing the UK economy to overcome the challenges of the current crisis.”