Jun 8th, 2020
3 mins
Following extensive discussions with the insurance sector, ministers have announced that Trade Credit Insurance schemes will receive up to £10 billion of government guarantees.
Trade Credit Insurance underwrites an estimated £350 billion of economic activity of more than 630,000 businesses in the UK each year. It insures suppliers selling goods against the company they are selling to defaulting on payment, giving businesses the confidence to trade with one another
However, due to coronavirus and businesses struggling to pay bills, there is a risk of credit insurance being withdrawn or premiums increasing to unaffordable levels, which could cause serious issues for liquidity and working capital across business supply chains
The scheme is available on a temporary basis for nine months, backdated to 1 April 2020, and running until 31 December 2020, with the potential for extension if required.
It will be delivered through a reinsurance agreement that is open to all insurers currently operating in the UK market, covering both domestic and overseas trade with payment terms of up to 2 years
The scheme rules will also require participating insurers to comply with certain undertakings regarding the conduct of their business during the period of the scheme. This includes conditions that insurers will forgo profits and will not pay dividends or bonuses for senior staff for their guaranteed Trade Credit Insurance business
To protect businesses that the private credit market cannot insure, export credit insurance is also available from UK Export Finance to cover UK exports to 180 countries. Government-backed export insurance from UKEF can protect the 230,000 businesses that export from the UK against the risk of not getting paid when selling internationally
Implementation of the scheme is subject to state aid approval, agreement of full form documentation with insurers and acceptance of applications from insurers for participation
We will update members as soon as more information becomes available.
