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Trade credit insurers cover record amount supporting exports and promoting economic growth

New figures from the ABI show that as the UK economy improves, trade credit insurers are providing more cover to businesses than ever before, insuring turnover worth £315 billion in 2014.

This is a 6.6% increase in turnover insured from the previous year. However, the average premium for a trade credit insurance policy has fallen by more than 2% over the same period. Trade credit insurance promotes financial growth by giving businesses the confidence to extend credit to companies they are trading with.

Last year, businesses took out almost 10,600 trade credit insurance policies to protect themselves against the financial distress of a trading partner. While turnover insured was higher in 2014, businesses made over 10,300 claims on their insurance, a 1.9% decrease from the previous year. This reflects improvements in the UK economy, with total company insolvencies in England at the lowest level since 2007.*

Trade credit insurance is also a valuable tool in facilitating international trade by helping businesses to manage increased risks that come with exporting. Total trade exports have increased by 4% since last year.**

Trade credit insurance plays a particularly important role for small businesses who are less able to cope with the impact of customer insolvency, and in addition can assist them with obtaining finance, as well as protecting them as they grow:***

  • In 2014, small businesses made more than 3,900 claims, accounting for 38% of the total claims made to trade credit insurers.
  • Insurers paid out £30.2m to these businesses, 25% of the total amount, which was worth £120m.
  • Trade credit insurance provides value for money for small businesses in particular, who receive 25% of the total value of claims received, but pay just 12% of the total premium.

Mark Shepherd, Manager for General Insurance Policy at the ABI comments:

"Trade credit insurers are covering a record £315 billion worth of turnover for UK businesses, protecting them against the financial risks of trading. Without this insurance in place, companies are at risk of large financial losses, and potential job losses if a company they are supplying gets into difficulty. As the UK economy improves, trade credit insurance provides reassurance and encourages businesses to expand, supporting sustainable growth.

"Trade credit insurance is particularly valuable for small businesses that are looking to grow by protecting their supply of goods and services on credit to their trading partners. This insurance can improve access to finance, and credit insurers work with their customers to help them understand and manage their risk when trading with other firms."

What is trade credit insurance?

Trade credit insurance provides cover for businesses if their customers that owe money for products and services do not pay their debts, or pay them later than the payment terms dictate. This insurance protects businesses against commercial risks that are beyond their control and helps them to grow by minimising the financial implications of sudden or unexpected customer insolvency. Credit insurance gives businesses the confidence to extend credit to new customers and improves access to bank funding, often at more competitive rates. Trade credit insurance is for products and services that are due within 12 months.

Trade credit insurers are able to offer their customers guidance and advice about credit risks and new markets to help businesses expand and grow.

* The Insolvency Service- Insolvency Statistics- April to June 2015 (Q2 2015): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/448858/Q2_2015_statistics_release_-_web.pdf

** HMRC UK trade info- overseas trade statistics: https://www.uktradeinfo.com/Statistics/OverseasTradeStatistics/Pages/OTS.aspx

*** Small businesses with a turnover of less than £5m

Last updated 01/07/2016