The ABI welcomes today’s Government announcement that it intends to develop a government-backed temporary reinsurance scheme to help businesses recover from the impacts of COVID-19.
The scheme could help speed up the economic recovery, ensuring the continued availability of trade credit insurance in the face of unprecedented financial pressures currently being faced across most business sectors. It follows similar action being taken in other European countries, and Canada, where state- backed schemes have been developed to help businesses continue to benefit from affordable trade credit insurance protection. The ABI will look to continue to work with the Government to develop the scheme, so that businesses can trade with confidence despite the challenging economic circumstances.
Over the past weeks and months the ABI has worked closely with the Government to explain the difficult trading environment that lies ahead for businesses due to the unprecedented widespread economic impact of Covid-19 across all sectors. If implemented correctly, this Government-backed scheme should allow businesses to continue to access cover against the risk of supply chain insolvencies. This is a vital protection to help minimise the knock-on effects of the challenging economic circumstances. This temporary scheme will ensure that trade credit insurers can continue to provide cover for businesses across the country by taking on more risk than they otherwise would have been able to, so helping the UK’s economic recovery.
Trade credit insurance is a dynamic product where cover levels adapt regularly to economic conditions. It 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. This could result from businesses not being able to pay for goods and services delivered as the result of Coronavirus. Insurers provide an ongoing service to their customers, advising and providing information on the financial strength of those buyers and markets that they are considering doing business with.
James Dalton, ABI’s Director of General Insurance Policy, said:
"As we emerge from lockdown and restart the economy, we have worked with Government to outline the difficult trading environment that lies ahead, and this Government-backed scheme, once implemented, will help businesses and their supply chains get back on their feet.
This is a welcome step by the Government, which mirrors similar action being taken by other countries across the world, which are facing the same issues as the UK trade credit insurance market in these exceptional times. If developed in the right way, this temporary scheme will give reassurance to the thousands of businesses who rely on the security that trade credit insurance cover provides.
The scheme could help protect the supply chain, safeguard jobs and kick start the economy, boosting business confidence as we begin to emerge from the dark shadow of COVID-19. The priority now is to urgently work through with the Government how this scheme will operate in practice so that it can support businesses through the difficult trading environment, now and in the months ahead.”