Trade credit insurance is a contract acquired by suppliers to make sure they get paid even if their customers default. This gives businesses the confidence to trade with one another and is especially important as the COVID-19 pandemic continues to decimate many businesses. The risk of COVID-19 meant that insurers could withdraw insurance or increase premiums to unaffordable levels.
HM Treasury has now confirmed that to prevent this from happening, the government will provide guarantees for all currently available for trade credit insurance. This will 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 final details of the scheme are being worked on and government will liaise 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 insurers.
The 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 temporary and targeted to cover COVID-19 economic challenges and will provisionally last until the end of the year.
It will be followed by a review of the trade credit insurance market to ensure continued support for businesses in the future. Further details will be announced in due course