Businesses with supply chains which rely on Trade Credit Insurance and who are experiencing difficulties maintaining cover due to Coronavirus will now get support from the government.
Delivered through a temporary reinsurance agreement with insurers currently operating in the market the government will work with businesses and the industry on the full details of the scheme to ensure firms are supported and risk is appropriately shared between the government and insurers.
Trade Credit Insurance provides cover to hundreds of thousands of business to business transactions, particularly in non-service sectors, such as manufacturing and construction. As of April 2020 there was over £171 billion business activity insured, covering transactions between around 13000 suppliers and 650,000 buyers
It insures suppliers selling goods against the company they are selling to defaulting on payment, giving businesses the confidence to trade with one another but due to Coronavirus and businesses struggling to pay bills, they risk having credit insurance withdrawn, or premiums increasing to unaffordable levels.
To prevent this from happening, the government will temporarily guarantee business-to-business transactions currently supported by Trade Credit Insurance, ensuring the majority of insurance coverage will be maintained across the market. This will support supply chains and help businesses to trade with confidence as they can trust that they will be protected if a customer defaults on payment.
The guarantees will cover trading by domestic firms and exporting firms and the intent is for agreements to be in place with insurers by end of this month.
The guarantee will be temporary and targeted to cover CV-19 economic challenges, and will provisionally last until the end of the year. It will be followed by a review of the TCI market to ensure it can continue to support businesses in future. Further details will be announced in due course.