The government has announced today that it will temporarily guarantee business-to-business transactions covered by Trade Credit Insurance.
The move is aimed at supporting business supply chains which rely on this insurance and are having problems maintaining insurance cover because of COVID-19, either because credit insurance is being withdrawn or premiums are increasing to unaffordable levels.
The news will be particularly welcome in those non-service sectors (such as manufacturing and construction) where business-to-business transactions are insured so that suppliers selling goods are protected against customer payment defaults.
The government will achieve this guarantee through a temporary reinsurance agreement with insurers operating in the market.
The full details of the scheme have yet to be finalised, but the government plans to work with businesses and the industry to ensure firms are supported and risk is appropriately shared between the government and insurers.
The guarantees will cover trading by domestic firms and exporting firms and the intent is for agreements to be in place with insurers by end of this month; with the guarantee targeted to cover COVID-19 economic challenges until (provisionally) the end of 2020.
A review of the Trade Credit Insurance market is also planned. Further details will be announced in due course.
Participants in the Trade Credit Insurance market will want to pay close attention to the details of the scheme as and when they are clarified by the government. Whilst this government scheme offers welcome protection, policyholders will still need to check their own specific terms, from considering any exclusions or warranties to notification requirements when making a claim. In particular, where any payment terms are renegotiated between supplier and customer, ordinarily advance insurer consent will be required.
Get in touch with our global insurance team for more information and help navigating these developments in Trade Credit Insurance.