Broker criticises government credit insurance plans

Leading credit insurance broker Aon has given a thumbs-down to the government’s highly anticipated credit insurance ‘top-up’ scheme.

The £5bn initiative, unveiled as part of yesterday’s Budget, will allow companies that have had their cover reduced by traditional providers to top up with the government.

The IT channel has not been immune to credit insurers’ cutbacks in the face of spiralling claims. Retail giant DSGi and corporate reseller Insight Enterprises were among those impacted by Euler Hermes’ recent round of cuts, and onlookers have expressed hope the government’s announcement will ease the strain on channel trade.

But trade finance specialist Aon Trade Credit warned that the scheme in its current form does not go far enough, adding that it is more expensive than France’s equivalent ‘Le CAP’ initiative.

Aon said it was “delighted” the government has realised there is a need to support trade but expressed disappointment the scheme only covers recent and future limit reductions.

“It does not address the needs of companies whose limits have already been withdrawn, even when they pay their bills on time,” Aon said.

Aon also urged the scheme to be extended to support exports to allow for a time delay to the impact of credit limit reductions and withdrawals.

It also recommended the government consider extending it beyond the end of the year.

“The scheme reflects largely 'Le CAP' in France which was introduced late last year and is rated at 1.5 per cent per annum on the limit, charged quarterly. The UK scheme is rather more expensive - at an annualised rate of 4.6 per cent on the limit purchased,” the company added.

According to recent figures from the Association of British Insurers, trade credit insurance claims jumped by 51 per cent year on year to 8,366 in the final three months of 2008.