The Government has announced that Trade Credit Insurance, which provides essential cover to hundreds of thousands of business-to-business transactions, will receive up to ￡10 billion of government guarantees. The Trade Credit Reinsurance, led by the Department for Business, Energy and Industrial Strategy, will temporarily reinsure the credit risks of business-to-business transactions covered by Trade Credit Insurance in the UK. Trade credit insurance protects businesses if customers in the supply chain who owe money for products or services do not pay their debts or pay them later than the payment terms dictate. Under this 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. Under this scheme insurers will take 10% of claims that result from business failure while government will take 90% of the premium and claims. This sharing of risk will allow insurers to provide wider cover to UK businesses affected by the Covid-19 crisis, and to aid companies to resume trading, knowing that they are protected from the failure of trading partners to pay for goods and services supplied.
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