Government to provide Trade Credit Insurance guarantee

Businesses with supply chains that rely on Trade Credit Insurance and who are experiencing difficulties maintaining cover due to Coronavirus will get support from the government, the Economic Secretary to the Treasury, John Glen has announced.

Trade Credit Insurance provides cover to hundreds of thousands of business to business transactions, particularly in non-service sectors, such as manufacturing and construction. 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 But due to Coronavirus and businesses struggling to pay bills, they risk having credit insurance withdrawn, or premiums increasing to unaffordable levels.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 Economic Secretary to the Treasury, John Glen said “This country’s businesses are crucial in helping us to kick start the economy as we get back to work, and I will do everything I can to help support them through this difficult time. By guaranteeing business-to-business transactions currently supported by Trade Credit Insurance, we will help to maintain a vital cog in our economy.”

“This is on top of an unprecedented package of support we have put in place to help protect individuals, businesses and the economy.”

Business Minister, Paul Scully, said “Giving businesses the confidence to continue trading is vital to seeing us through this crisis. This guarantee will be essential as we seek to reopen new sectors of the economy and get the UK back to work in a way that is safe for everyone.”

The guarantee will be 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.

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.

Milo Bogaerts, Chief Executive of Euler Hermes UK and Ireland, said “Ensuring UK businesses can continue to trade in confidence while they recover from the effects of the crisis is essential. This temporary reinsurance support creates a protective shield for credit-insured clients during this crisis. It will ensure that essential coverage remains in place and liquidity maintained across the supply chain.”

Euler Hermes will continue to work alongside the UK government, the Association of British Insurers (ABI) and other commercial trade credit insurers to agree the detail of the scheme to help businesses restart the UK economy as it emerges from lockdown.

Alun Sweeney – Director Atradius UK & Ireland said “The trade credit insurance industry represented by our trade body the ABI has worked closely with the Government to outline the difficult trading environment that lies ahead, and we are confident that this Government-backed scheme, once implemented, will make a significant difference for businesses and their supply chains as they emerge from lockdown and trade flows are re-established.”

“This is a welcome step by the Government, and is fully supported by Atradius. We have seen similar action being taken in other markets across the world and we welcome the UK Government’s recognition that UK firms should also be supported in this way. It’s important now to ensure that the detail of this temporary scheme is developed quickly to give reassurance to the thousands of businesses who rely on the security that trade credit insurance cover provides.”

“The scheme could help protect the supply chain, safeguard jobs and provide a welcome boost to our struggling economy. Business confidence is a critical factor in creating the right environment for firms to be able to emerge from this very difficult period and trade credit insurance allows firms to trade with confidence. The priority now is to urgently work through with the Government how this scheme will operate in practice so that it can support businesses through the difficult trading environment, now and in the months ahead.”