At the begining of this week the UK Government (HMG) support for trade credit insurance went live. This is good news for the economy, as it will help to support insurance capacity at a difficult time, when insurers might otherwise have been taking a more cautious approach. This capacity will help to support credit supply lines, and thereby working capital for businesses.
Claims remain low at the time of writing, but all forecasters (from R3 to the OBR) are predicting a rise in company failures over coming months, and credit insurance will be available to help support businesses in these troubled economic times. The participating insurers are sacrificing their premium (which is paid to HMG, in return for which the Government will pay 90% of claims) which speaks volumes for their respective forecasts on losses. The scheme runs from the 1st of April to the 31st of December, with a possible extension for a further 3 months. Similar schemes are already in place in Germany, France, the Netherlands and Belgium.
The scheme does not need to be applied for. It is a complex reinsurance programme that sits behind most existing policies. Most (though not all) insurers are participating, and simply taking out a policy will mean you will automatically join the scheme.
However, it is not a universal panacea. HMG is keen that insurers continue to write risk sensibly, declining poor risks and taking a realistic approach on premiums. The warnings we have put in previous newsletters still apply. Despite this, and based on the forecasts we have seen, it is likely that many holders of cover will see a return on their premium over the next 6 months.
Please see the `contact us' section if you have any queries, or contact one of our team directly through the `meet the team' page.