In previous blogs we have looked at the impact that COVID-19 was having on the availability of trade credit insurance and discussions around how Government might support this vital insurance market for companies at a time of crisis. This comes at a time when insurers are facing increased claims as a result of the pandemic with some insurers responding by withdrawing cover or increasing premiums.
Good news has emerged today from HM Treasury with an announcement that businesses with supply chains which rely on trade credit insurance, and who are experiencing difficulties maintaining cover due to COVID-19, will get Government help.
The Government has said that it will temporarily guarantee business-to-business transactions currently supported by trade credit insurance, ensuring the majority of insurance coverage should be maintained across the market. The Government says that the aim is to 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 added:
“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.”
As we have suggested previously might be the case, the guarantee will be delivered through a temporary reinsurance agreement with insurers. 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 the insurance market.
The Government says that 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 targeted to cover COVID-19 related economic challenges and will provisionally last until the end of 2020. It will then be followed by a review of the trade credit insurance market to ensure it can continue to support businesses in future.