On 4th June 2020 the details of the Government Trade Credit Support Scheme were announced. The Government will support UK private sector B2B trade credit insurers with a £10 billion guarantee from 1st April 2020 until 31st December 2020.
The Association of British Insurers (ABI) along with a number of trade credit insurers negotiated the scheme with the Government over the past two months. The Government will act as a reinsurer to the trade credit insurance industry, meaning it will share the losses from insolvencies with the insurers. Insurers will take 10% of the claims from insolvency and the Government will take 90% of the premium and claims.
The aim is to allow credit insurers to maintain credit coverage where supply chains have been impacted by Covid-19 and reduce the impact of unaffordable premium rate increases. This will help ensure credit insurance remains readily available to support business recovery as lockdown restrictions are eased.
Milo Bogaerts, Chief Executive of Euler Hermes UK and Ireland, said:
“Through this landmark agreement the public and private sectors are joining forces to support ‘UK plc’ by maintaining liquidity and confidence in the intercompany trade credit market. This will help our customers through this difficult period, help them to remain competitive, and allow them to take every opportunity to restart trading with confidence as the UK economy emerges from lockdown.”
Alun Sweeney, Regional Director UK & Ireland of Atradius, said:
“We have recognised from the very beginning of the Covid-19 crisis that the consequences for trade would be significant and we very much welcome this positive and supportive response from the Government. As an industry, we remain aligned in regard to the need for this kind of action and together with our colleagues at the Association of British Insurers we have been committed to make it a reality. The Scheme is an essential measure to help boost our economic recovery, help protect the supply chain, safeguard jobs, and increase business confidence and will make a real difference to the thousands of businesses who rely on the security that trade credit insurance cover provides.”
Coface has welcomed the announcement saying that:
“A key component of the scheme is to maintain (subject to normal underwriting practices) credit limits on buyers that are temporarily affected by the Covid-19 crisis and whose solvency would otherwise not be questioned. Maintaining cover as far as possible between suppliers and their clients will be a key ingredient in allowing the UK economy to overcome the challenges of the current crisis.”
At FinCred IS we understand that companies will be keen to learn how this announcement will affect their credit insurance cover.
Hannah Lyon-Wall, Director of credit insurance broker FinCred IS can assist with any of these queries.
Contact Hannah on Hannah_lyonemail@example.com Direct: 01732 749754 Mobile: 07825 178928
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