Trade credit insurer Atradius has welcomed the launch of the temporary, government-backed reinsurance scheme to help businesses recover from the impacts of Covid-19.
The scheme, worth up to £10 billion in guarantees, aims to ensure the continued availability of trade credit insurance in the face of unprecedented financial pressures currently being experienced across most business sectors.
The scheme reflects similar state-backed support being developed across Europe and in Canada, and enables insurers to provide capacity based on normal underwriting practices for the otherwise sound businesses whose solvency is temporarily affected by the Covid-19 crisis.
Maintaining cover as far as possible between suppliers and their clients will be a key ingredient in allowing the UK economy to overcome the challenges of the current crisis, according to Atradius.
The launch of the scheme follows weeks of intensive discussions between the insurance industry, including Atradius, and the government. Engagement with the government has been largely led and brokered by the Association of British Insurers.
Under the temporary scheme, the government will act as a reinsurer to the trade credit insurance industry, sharing the risk of losses arising from business insolvency with insurers. The scheme is structured with the purpose of supporting companies to resume trade and enable supply chains to function normally.
The scheme is available on a temporary basis for nine months, backdated to 1 April, and running until 31 December, with the potential for extension if required.
A review of the trade credit insurance market will follow, to ensure it can continue to support businesses in future.
Alun Sweeney, regional director for the UK and Ireland at Atradius, said: “We have recognised from the very beginning of this Covid-19 crisis that the consequences for trade would be significant and we very much welcome this positive and supportive response from the government.”
“As an industry, we remain aligned in regard to the need for this kind of action and together with our colleagues at the Association of British Insurers we have been committed to make it a reality.”
“The scheme is an essential measure to help boost our economic recovery, help protect the supply chain, safeguard jobs, and increase business confidence and will make a real difference to the thousands of businesses who rely on the security that trade credit insurance cover provides.”