Department for Business, Innovation and Skills
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Government's trade credit insurance top up scheme goes live
Firms suffering from a reduction in credit insurance will from today be able to purchase up to six months top-up cover as part of the Government's trade credit insurance scheme, announced in last week's Budget.
Under the scheme, which goes live today and runs until 31 December this year, suppliers will be able to purchase Government-backed insurance to either restore cover to the original level or double the amount they are able to obtain from the private sector up to the value of £1m (whichever is the lower).
Companies from all sectors and from all stages of the UK supply chain, which have suffered from a reduction in cover from 1 April 2009, will benefit from the increased certainty that this scheme gives - providing real and targeted help for British Businesses.
The scheme was established in response to growing concern from businesses that reductions in the value of insurance cover create pressure on suppliers to shorten payment terms, and can place additional pressure on businesses' working capital facilities.
Business Secretary Lord Mandelson said:
"The Government's Trade Credit Insurance top-up scheme provides a lifeline for businesses to help them address the specific challenges that they are facing as a result of the reduction in trade credit insurance.
"This scheme is a targeted transitional measure to help companies secure the cash flow they need and restore confidence throughout supply chains. Risk is shared between Government and the private sector striking the right balance between supporting businesses and protecting taxpayers' money."
A maximum of £5bn of top-up cover for trade credit insurance will be available through the scheme, which is part of the Real Help package and will be delivered through the Working Capital Scheme.
To apply or for further information companies should contact their trade credit insurer. Further information is also available through Businesslink.
Notes to Editors:
1. Trade credit insurance contracts provide
suppliers insurance against the risk of a buyer defaulting on
their payment for goods after a period of credit. The product
helps give suppliers confidence to extend sometimes lengthy
payment terms to their buyers and banks the security to provide
working capital facilities. By offering suppliers protection
against financial loss, trade credit insurance is sometimes used
to support provision of financing products such as loans, invoice
discounting and factoring services. Reduction or withdrawal of
credit insurance can therefore lead to financial pressure on both
buyers (as suppliers may wish to shorten payment terms) and on
suppliers (due to its interaction with other financial products).
2. The three largest credit insurers (Euler Hermes, Atradius and Coface) have agreed to offer the scheme to their eligible clients. Scheme membership has also been opened up to other credit insurance providers with whom Government is currently in discussions. Eligible businesses should apply for the scheme through their credit insurance provider.
3. In 2008 credit insurance firms insured over £300bn of turnover, covering over 14,000 UK clients in transactions with over 250,000 UK businesses.
4. Reductions in the value of insurance which have occurred since April 1, 2009 will be eligible for the scheme, meaning some businesses will be able to benefit from the scheme immediately it comes into effect.
5. Further details of the scheme can be found on the BusinessLink website at the following URL http://www.businesslink.co.uk/creditinsurance
6. On Tuesday April 21, the Association of British Insurers released a Statement of Principles outlining the standards of service customers can expect from their insurance provider. All insurers offering the Government top-up scheme are required to have signed up to the Statement. The Statement can be found at the following URL http://www.abi.org.uk/Newsreleases/viewNewsRelease.asp?nrid=17616
Department for Business, Enterprise & Regulatory
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