Government acts on trade credit insurance

by Gill Montia

Story link: Government acts on trade credit insurance

Demand for Government action on trade credit insurance is finally being answered, according to a report in The Times.

The insurance protects companies when customers fail to pay or enter administration and claims have been rising sharply, with the Association of British Insurers reporting a 59% increase during the third quarter of 2008.

Trade credit insurers are therefore behaving cautiously and the Confederation of British Industry, banks and others have been alerting ministers to the fact that withdrawal of the insurance or poor access to cover could threaten an already unstable economy; the collapse of Woolworth has been linked to the withdrawal of its credit insurance.

However, the Times has today reported that the Department for Business, Enterprise & Regulatory Reform will be announcing a multibillion-pound scheme that could involve the Government guaranteeing up to 50% of credit insurance claims.

Full details of the offering are not yet known but it is understood that support will be provided to medium-risk companies that have had trade credit cover reduced but not withdrawn.

Administration of the insurance will remain with insurance companies and premiums for customers struggling to secure cover are likely to reflect higher risk.