Gov confirms plan to back credit insurance industry

government announces 'temporary reinsurance agreement' with credit insurers

The government has confirmed it will "temporarily guarantee" all transactions currently covered by trade credit insurance, in a move seen as key to supporting businesses through the COVID-19 pandemic.

The shutdown across the UK has sparked fears that trade credit insurance will look to reduce their exposure and pull cover for a number of firms across multiple sectors, with the number of insolvencies expected to rocket.

The government said the scheme will be delivered through a temporary reinsurance agreement with insurers.

John Glen, economic secretary to the Treasury, said: "This country's businesses are crucial in helping us to kick start the economy as we get back to work, and I will do everything I can to help support them through this difficult time.

"By guaranteeing business-to-business transactions currently supported by Trade Credit Insurance, we will help to maintain a vital cog in our economy.

"This is on top of an unprecedented package of support we have put in place to help protect individuals, businesses and the economy."

The move comes after credit insurers, including Euler Hermes and Atradius, indicated that they would look to reduce their exposure.

Euler Hermes also pressured the government to offer a package similar to those already implemented in countries across Europe, including Germany.

Credit insurance expert Mike Stott said he hopes the UK government's deal will be similar, but added that the finer details are yet to be announced.

"This is excellent news but we need to see the details of this because the only scheme that has been approved by the European Commission so far is Germany's, which is very comprehensive and gives great support to businesses," he said.

"The government and the ABI will have been aware of this, so hopefully it mirrors the German template.

"If it does, it should be approved and in place quickly. It has arrived just in time to stop further credit limit cuts and should see other lines of credit restored as the economy opens up."

"The government said that package should be in place by the end of the month.

Posting on Twitter before the agreement was announced, Rich Marsden, boss at distie VIP, said the move should be used to help healthy businesses through this difficult period, not prop up businesses that would be struggling regardless.

The Association of British Insurers said it is working with the government to develop the scheme.

Director of general insurance policy James Dalton said: "As we emerge from lockdown and restart the economy, we have worked with government to outline the difficult trading environment that lies ahead, and this government-backed scheme, once implemented, will help businesses and their supply chains get back on their feet.

"The scheme could help protect the supply chain, safeguard jobs and kick start the economy, boosting business confidence as we begin to emerge from the dark shadow of COVID-19.

"The priority now is to urgently work through with the government how this scheme will operate in practice so that it can support businesses through the difficult trading environment, now and in the months ahead."