The government today has announced it has agreed to underwrite trade credit insurance for the rest of the year. This action will support many Credit insurance policyholders who faced having their cover withdrawn, or premiums increased to unaffordable levels.
The intervention hopes to gives businesses confidence to continue trading with their supply chain customers despite the fact that some of them will be in a much weaker financial position as a result of the Covid19 crisis.
The full details of the scheme are yet to fully published but it is expected in the coming days.
Verlingue Director of Trade Credit, Umberto Oliva said:
“This is positive news from the UK Government recognising the importance of Trade Credit Insurance and the vital role it plays in keeping businesses trading with each other.
Insurers are predicting significant claims due to company failures with some experts advising that over 500,000 UK businesses are currently in significant financial distress. The Credit Insurance market was in real danger of seizing completely or increasing premiums to unaffordable levels.
We hope that this support will reduce, if not remove, the need for further cover being withdrawn and restore a degree of stability to the market.”
What is Trade Credit Insurance?
- Trade credit insurance safeguards companies, who offer credit terms, against the risk that their customers go bust before paying for goods they have ordered.This cover gives businesses the confidence to trade with one another.
What does the government announcement mean for businesses?
- The government intervention will hopefully prevent the withdrawal of credit insurance, or premiums increasing to unaffordable levels. The government will temporarily guarantee business-to-business transactions by effectively reinsuring Trade Credit Insurers against claims caused by business failures
- The guarantee will help businesses to trade with confidence and maintain their supply chain as they can trust that they will be protected in the event a customer defaults on payment.
We are here to offer you and your business support
If you would like any support with what the government announcement will mean for your business, please don’t hesitate to get in touch with our dedicated Trade Credit Team.