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The Government will provide up to £10 billion of guarantees to Trade Credit Insurance schemes for business-to-business transactions.
The spending commitment, known as the Trade Credit Reinsurance scheme, has been agreed following extensive discussions with the insurance sector.
The new scheme will be available temporarily for nine months and backdated to 1 April 2020 for insurers operating in the UK market.
Due to Coronavirus and businesses struggling to pay bills, there was a concern that credit insurance might be withdrawn or premiums increased to unaffordable levels for some businesses, which would cause serious issues for liquidity and working capital across business supply chains.
The substantial guarantee will help to support supply chains and businesses during the coronavirus pandemic allowing them to trade with confidence, safe in the knowledge that they will be protected if a customer defaults or delays on a payment.
This important form of insurance covers hundreds of thousands of business-to-business transactions every year. More than £350 billion of economic activity of more than 630,000 businesses in the UK is underwritten by Trade Credit Insurance.
Under the scheme rules, participating insurers must comply with certain undertakings regarding the conduct of their business during the period of the scheme including conditions that they will forgo profits and not pay dividends or bonuses for senior staff for their guaranteed Trade Credit Insurance business.
Implementation of the scheme will be subject to state aid approval, agreement of full form documentation with insurers and acceptance of applications from insurers for participation.