British businesses will be able to tap vital trade credit insurance more easily after the Government on Wednesday pledged to backstop any losses that insurers suffer from offering cover.
Trade credit insurance is a type of contract bought by suppliers to make sure they get paid even if their clients default and cannot pay the bills.
It is a crucial mechanism to keep supply chains moving but coronavirus has forced many insurers to stop selling these contracts or hike prices to unaffordable levels because there is a greater risk creditors will go bust and not be able to pay suppliers.
The Treasury today told insurers it would temporarily shield them from losses so they are more comfortable offering the insurance to suppliers.
The scheme is likely to see the Government effectively become a reinsurer for trade credit insurers, paying businesses if creditors default.
The Association of British Insurers last month urged the Treasury to become a “reinsurer of last resort”.
Similar schemes currently operate in France and Germany to support firms through the Covid-19 crisis.
Large trade credit insurers include Euler Hermes, Coface and Atradius.
Treasury minister John Glen said: “We will help to maintain a vital cog in our economy.”
Firms paid £450 million of premiums to cover £350 billion of deals in 2019.
