Trade Credit insurance is the key to successful trade. Trade credit insurance is a pioneer in innovation and performance. It has been supporting businesses for decades around the world.
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Trade credit insurance provides more than protection from loss. Policyholders have access to comprehensive information about all aspects of trade, and can also receive guidance from industry professionals.
British companies took out almost 14,000 policies in trade credit insurance in 2019, which is a great enabler. ABI members were able to insure almost PS367 billion worth of turnover in 2019 and enable numerous trading partnerships.
These pages explain what trade credit insurance looks like, how it works, and the benefits it offers businesses who trade in the UK. These pages provide information about the different types of policies that are available as well as how businesses can obtain suitable trade credit insurance coverage.
The industry partnered with HM Government in response to the 2020 COVID-19 pandemic. A Trade Credit Reinsurance Scheme was created to provide continued support to UK businesses during the lockdown, and facilitate a rapid economic recovery. You can find more information about the Scheme, including how it works and how it will affect customers and businesses.
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After the 2020 COVID-19 epidemic, the industry and the HM Government collaborated to create a temporary state-backed support program for Trade Credit insurance.
This scheme is designed to accelerate the economy’s recovery by providing trade credit insurance that continues to be widely available, despite the unprecedented financial pressures facing most business sectors. Trade credit insurers are able to continue providing coverage for many businesses in the country, which may not have been possible without this scheme.
The Government will be acting as a reinsurer for the trade credit industry under this temporary scheme. The government will share with insurers the risk of business insolvency losses. Insurers will cover 10% of business failure claims, while the government will pay 90% of those claims and take 100%.
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If their insurer is a participant in the scheme, UK companies that are covered by trade credit insurance will automatically be included in the scheme. Brokers will still play an important role in helping businesses get the right coverage.
The scheme will be in effect until 31 December 2020. In October 2020, a review of its operation and the possibility of extending it will take place.
How the Scheme works
To ensure continuity of coverage for affected businesses, the Government-backed Trade Credit support Scheme was created. To receive the Government support, policy holders and their trading partners won’t need to buy additional coverage. Participating insurers will manage this scheme for the Government. This allows policy holders to directly benefit from the continued availability of credit limits and the ability to take advantage of credit limit increases, if necessary. Trade Credit policy holders who don’t have one can purchase one that will be covered by this government support program. To explore their options, they should speak to a credit broker.
Policy holders who have a claim will be able to continue to communicate with their broker or insurer and will receive their claim in the usual fashion and according the policy terms. Any claim will be notified by the insurance company and a portion of the loss will be recovered from the government.
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Participating insurers have agreed to follow very strict guidelines set out by the Government regarding how the scheme should work. The Department for Business, Energy and Industrial Strategy is responsible for ensuring that these rules are implemented. You can find the complete scheme rules and a list with participating insurers on the Government’s site.