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UK Government guaranteeing £10bn of Invoice Insurance

In the second half of May we wrote that details were being worked on by trade credit insurers, businesses and the government to provide temporary reinsurance for the industry until the end of 2020.

An agreement has now been reached to backdate this cover from April 1st until the end of 2020. 

 

£10bn government guarantee to keep businesses trading

As more businesses plan to open up again, the support of the government for the trade credit insurance sector could prove essential. Protecting receivables from the risk of bad debt or insolvency is prudent at all times and arguably more so now.

What this guarantee means for many cash strapped businesses is the confidence to extend credit terms, where they would otherwise opt not to do business or insist on cash up front. This would have the potential to bring trade to a standstill and further debilitate an already struggling economy.

Despite facing significant claims, insurers under this agreement will not drastically cut or reduce the vital cover required to ensure that B2B trade continues without more friction.

Business Secretary of State Alok Sharma said:

“Trade Credit Insurance is a daily necessity for hundreds of thousands of businesses across the UK… This reinsurance scheme is an important step as we carefully set about firing up our economy as we emerge from the pandemic.”

Details of the deal as outlined by the UK Government

  • Trade credit insurance coverage to be maintained across the market in light of COVID-19, with up to £10 billion government backing
  • Measures will support thousands of businesses by protecting against customer defaults or payment delays
  • The scheme is available on a temporary basis for nine months, backdated to 1 April 2020, and available insurers operating in the UK market.
  • The scheme will be delivered through a reinsurance agreement that is open to all insurers currently operating in the UK market, covering both domestic and overseas trade with payment terms of up to 2 years
  • The scheme rules will also require participating insurers to comply with certain undertakings regarding the conduct of their business during the period of the scheme. This includes conditions that insurers will forgo profits and will not pay dividends or bonuses for senior staff for their guaranteed Trade Credit Insurance business.

Significant challenges still lie ahead for businesses of all shapes and sizes. However, with government backing, taking out invoice insurance is a simple step to a safer and more secure business. Ensuring that you get paid, despite the risk of default .

We’d be delighted if you get an invoice insurance quote by clicking the link below. It’s a simple process and won’t take long.

Nic Gidaracos