Trade Credit Insurance
Trade Credit insurance provides the key to successful trade. To deliver the very best solutions to the market, the trade credit insurance industry champions innovation whilst maintaining the highest standards of performance that only many decades of supporting businesses around the globe can bring.
Trade credit insurance is more than a simple protection against loss; policyholders benefit from access to detailed information on all aspects of trade and receive guidance from industry experts.
Trade credit insurance is an enabler for businesses with almost 14,000 policies taken out by British companies in 2019; not only to protect their business, but also to see it grow. In 2019, ABI members insured almost £367 billion of turnover and enabled numerous trading partnerships to flourish.
These webpages explain what trade credit insurance is, how it works and the benefits it can bring to businesses of all sizes who trade in the UK. They provide details of the types of different policies available and how a business can go about taking out suitable trade credit insurance cover.
In response to the 2020 COVID-19 pandemic, the industry worked with HM Government to implement a Trade Credit Reinsurance Scheme to ensure continued support for UK businesses throughout the lockdown and to help facilitate a swift economic recovery. More information on the Scheme, how it works, how it will impact customers and businesses, and some FAQs about the Scheme can be found here; https://www.gov.uk/government/publications/trade-credit-reinsurance-scheme
Trade Credit Reinsurance Scheme
Following the 2020 COVID-19 outbreak, the industry and HM Government worked together to create a temporary, state-backed support scheme for Trade Credit insurance.
The scheme aims to help speed up the economic recovery, by ensuring the continued widespread availability of trade credit insurance, which otherwise would not have been possible in the face of unprecedented financial pressures being experienced across most business sectors. The scheme helps trade credit insurers to continue to provide cover for a wide range of businesses across the country that may have otherwise have not been able to avail of this insurance protection.
Under this temporary scheme, the Government will act as a reinsurer to the trade credit insurance industry. The Government will share the risk of losses arising from business insolvency with insurers. Insurers will pay10% of claims that result from business failure while government will pay 90% claims and take 100% of premium.
UK businesses covered by trade credit insurance will be included automatically in the scheme if their insurer participates in it. Brokers will continue to play a vital role in helping businesses access cover to meet their needs.
The scheme will run until 31 December 2020, with a review on the operation of the scheme and whether it should be extended being conducted in October 2020.
Explanation of how Scheme operates
The Government backed Trade Credit support Scheme has been devised to ensure continuity of cover for affected businesses across the country. Policy holders and their trading partners will not need to purchase extra coverage to avail of the Government support. Participating insurers will manage the scheme on the Government’s behalf, allowing the benefits to flow through to policy holders directly in the form of continued availability of existing credit limits as well as the ability to avail of credit limit increases if these are proven necessary. Businesses who do not currently have a Trade Credit insurance policy can seek to purchase a policy that will be covered under this government support scheme. They should contact a credit insurance broker to consider their options.
If a claim arises, policy holders will continue to engage with their insurer or broker directly and will have their claim paid in the normal fashion and in line with the policy terms. Insurers will alert the Government to any claim and will recover a proportion of this loss from the Government.
Insurers who are participating in the scheme have agreed to stick by very strict rules set by the Government for how this scheme should operate. The implementation of these rules is being overseen by the Department for Business, Energy and Industrial Strategy. The full scheme rules can be found on the Government’s website along with a list of participating insurers.