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Extension to Government's trade credit insurance top-up scheme

DEPARTMENT FOR BUSINESS, INNOVATION AND SKILLS News Release (2009/182) issued by COI News Distribution Service on 9 June 2009

Business Secretary Peter Mandelson today announced changes that will mean many more firms can now purchase top-up cover as part of the Government's trade credit insurance scheme.

Since 1 May, companies who have had their credit insurance cover reduced have been able to purchase six months top-up cover under the £5bn Government Scheme.

In response to requests from business, from today eligibility for the scheme will be backdated to include suppliers who had their cover reduced since 1 October last year. Previously, the Scheme was available to companies who had cover reduced since April this year.

Business Secretary Lord Mandelson said:

"This extension will give more small and medium sized businesses flexibility to respond to a reduction in their credit insurance cover. We are acting decisively to help more businesses and allow them the breathing space to adjust their business models in response to the current climate."

CBI Director-General, Richard Lambert said:
"This change, which the CBI called for, gives more help to those businesses left vulnerable without sufficient trade credit insurance cover since the autumn. Restoring confidence is critical to improving the economy, and this gives companies more certainty about their ability to trade."

Also from today credit insurance provider HCC will join the three largest credit insurers (Euler Hermes, Atradius and Coface) as a provider of the Government Scheme.

The Scheme, which runs until 31 December 2009, allows suppliers 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).

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 scheme will now cover a business' trade providing the cover was reduced after 1 October 2008. The business would simply be able to purchase a policy, topping up their cover to the maximum level it was since 1 October 2008 or to match the reduced level of cover so long as the government bears no more than 50% of the total risk. This will also be the case where a company has had their cover withdrawn completely since 1 October but had since had cover partially reinstated.

3. The three largest credit insurers (Euler Hermes, Atradius and Coface), and now also HCC International Insurance Company plc, 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.

4. In 2008 credit insurance firms insured over £300bn of turnover, covering over 14,000 UK clients in transactions with over 250,000 UK businesses.

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

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