Government reinsurance scheme – statement

Atradius welcomes today’s Government announcement that it intends to develop a treasury-backed temporary reinsurance scheme to help businesses recover from the impacts of Covid-19. The scheme, which has the backing of the Association of British Insurers and is supported jointly by the UK’s leading trade credit insurance providers, aims to smooth the path toward economic recovery, ensuring the continued availability of trade credit insurance in the face of unprecedented financial pressures on UK businesses across almost all sectors. It follows similar action being taken in other European countries, and Canada, where state-backed schemes have been developed to help businesses continue to benefit from trade credit insurance protection.

Trade credit insurance provides cover to hundreds of thousands of business to business transactions, including service sectors such as healthcare, social amenities and hospitality and crucially as we emerge from lockdown, the non-service sectors, such as manufacturing and construction. It insures suppliers selling goods on credit terms against the risk of the company they are selling to defaulting on payment, giving businesses the confidence to trade with one another.

The UK’s leading trade credit insurers, including Atradius, will continue to work closely with the ABI and the Government to develop and implement the scheme, so that businesses can trade with confidence and enable supply chains to get back on their feet. The Government will temporarily guarantee business-to-business transactions currently supported by trade credit insurance, ensuring the majority of insurance coverage will be maintained across the market.

If implemented correctly, this scheme should allow businesses to continue to access cover against the risk of supply chain insolvencies. This is a vital protection to help minimise the knock-on effects of the challenging economic circumstances. This temporary scheme will ensure that trade credit insurers can continue to provide cover for businesses across the country by taking on more risk than they otherwise would have been able to, so helping the UK’s economic recovery.

Alun Sweeney – Director Atradius UK & Ireland said: “The trade credit insurance industry represented by our trade body the ABI has worked closely with the Government to outline the difficult trading environment that lies ahead, and we are confident that this Government-backed scheme, once implemented, will make a significant difference for businesses and their supply chains as they emerge from lockdown and trade flows are re-established.

“This is a welcome step by the Government, and is fully supported by Atradius. We have seen similar action being taken in other markets across the world and we welcome the UK Government’s recognition that UK firms should also be supported in this way. It’s important now to ensure that the detail of this temporary scheme is developed quickly to give reassurance to the thousands of businesses who rely on the security that trade credit insurance cover provides.

“The scheme could help protect the supply chain, safeguard jobs and provide a welcome boost to our struggling economy. Business confidence is a critical factor in creating the right environment for firms to be able to emerge from this very difficult period and trade credit insurance allows firms to trade with confidence. 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.”