Last reviewed 22 June 2020
The Government has announced that trade credit insurance, which provides essential cover to hundreds of thousands of business-to-business transactions, will receive up to £10 billion of guarantees.
The trade credit reinsurance, led by the Department for Business, Energy and Industrial Strategy (BEIS), will temporarily reinsure the credit risks of business-to-business transactions covered by trade credit insurance in the UK.
The Road Haulage Association (RHA) said that this would support thousands of businesses by protecting against customer defaults or payment delays.
Chief Executive, Richard Burnett, said: “Today’s announcement follows months of intensive lobbying by the Association on behalf of the entire UK haulage industry. We have been asking government to do more to help operators through the Covid-19 crisis as they gear up to drive economic recovery.”
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.
Trade credit insurance protects businesses if customers in the supply chain who owe money for products or services do not pay their debts or pay them later than the payment terms dictate.
Under this temporary scheme, the Government will act as a reinsurer to the trade credit insurance industry, sharing the risk of losses arising from business insolvency with insurers.
UK businesses covered by trade credit insurance will be included automatically in the scheme if their insurer participates in it. They should consequently find it easier to access cover in the market that would otherwise have been difficult to provide.
The Government will reinsure 90% of insurance claims up to a cap of £3 billion and 100% of claims between £3 billion and £10 billion. It will receive 90% of gross policy premiums and return 35% of these premiums to insurers to cover their costs.