August 2020

Trade Credit Insurance backed by £10 billion guarantee

The Government has been working hard to finalise the Trade Credit Reinsurance Scheme since it was first announced on 4 June. The scheme is now operational - the Government now have State Aid clearance and the vast majority of insurers have signed up to deliver the scheme. HMG are still finalising contracts with insurers but expect these to be signed by mid-August.

Full details will appear on gov.uk shortly, but in the meantime to confirm that the Scheme will:

• Provide temporary support to businesses through trade credit insurers in the form of a reinsurance arrangement to mitigate the economic impacts of Covid-19 on trade credit coverage. The scheme will be back dated to 1 April and run until 31 December.
• See the Government reinsure 90% of insurance claims up to a cap of £3bn total industry insurer losses and 100% of claims between £3bn and £10bn of total insurer losses.
• Put a number of restrictions on insurers meaning they can only withdraw cover where the justification for doing so is not related to Covid-19 economic impacts, to avoid large-scale or bulk withdrawals of cover.
• Support UK businesses. Broadly similar schemes have been implemented in other European Nations such as Germany, France, Denmark, Belgium and the Netherlands.

As the scheme operates through Trade Credit Insurers, there is no need for underlying businesses to sign up to the scheme. Any business looking to access TCI should contact either a participating insurer, or an insurance broker who will be best placed to advise them.

If a business has had cover withdrawn, they should first look to their existing provider to reinstate cover (which, in many cases, should be possible now that the scheme is operational). Alternatively, if the existing provider is unwilling to reinstate cover or the insurer is not participating in the scheme, they should look to alternative providers who should be able to provide cover.

Whilst the scheme is intended to address the impacts of COVID-19 on the coverage a business can receive, maintaining underwriting standards are important to maintaining a functioning market. As such, an insurer may still look to withdraw/limit cover. If a business believes they have had cover incorrectly withdrawn, they should look to get this cover reinstated.

Find out more: https://www.gov.uk/government/news/trade-credit-insurance-backed-by-10-billion-guarantee