- Trade credit insurance coverage to be maintained across the
market in light of COVID-19, with up to £10 billion government
backing
- measures will support thousands of businesses by protecting
against customer defaults or payment delays
- scheme is available on a temporary basis for nine months,
backdated to 1 April 2020, and available insurers operating in
the UK market
Trade Credit Insurance, which provides essential cover to
hundreds of thousands of business-to-business transactions, will
receive up to £10 billion of government guarantees, ministers
announced today.
The Trade Credit Reinsurance scheme, which has been agreed
following extensive discussions with the insurance sector, will
see the vast majority of Trade Credit Insurance coverage
maintained across the UK.
The guarantees will support supply chains and help businesses
during the coronavirus pandemic to trade with confidence, safe in
the knowledge that they will be protected if a customer defaults
or delays on payment.
Business Secretary of State 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.
Our £10 billion guarantee gives 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.
The Economic Secretary to the Treasury, said:
Billions of pounds of business turnover is supported by Trade
Credit Insurance each year. This reinsurance scheme will see
the government and insurers working closely together to ensure
that the vast majority of this cover remains in place. This
means that businesses and supply chains can continue to be
protected at this pivotal time as we begin to kick start the
economy.
BCC Director General Adam Marshall said:
The government has demonstrated once again that it is listening
to the concerns of our business communities.
The launch of a government-backed guarantee to support the
provision of trade credit insurance will help ensure that this
vital lifeline remains available to businesses during and after
this crisis, helping to maintain supply chains and trade.
Stephen Phipson, CEO of Make UK, said:
For most manufacturers, credit insurance is essential – giving
them certainty that they will be paid for the orders they
deliver. We’re pleased that the government has taken action to
jump-start the credit insurance market – which will provide a
welcome boost to our nation’s makers as they recover from
the COVID crisis.
IoD Head of Europe and Trade Policy Allie Renison said:
These measures are a lifeline for many businesses with nowhere
else to turn. 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.
CBI Director of
Financial Services, Flora Hamilton said:
The new government guarantee to backstop trade credit insurance
will be welcome by businesses across the UK.
The TCI scheme will support
supply chains, enable many to prepare for restart in earnest
and bring employees off the job retention scheme and back into
work.
This is a very critical step, along with other government
financial support, in driving the recovery of the UK.
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.
The scheme will be followed by a joint BEIS/HMT-led
review of the Trade Credit Insurance market to ensure it can
continue to support businesses in future.
Notes to editors
- 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
- 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 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 UKEFcan 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
