Budget action on credit insurance expected

by Gill Montia

Story link: Budget action on credit insurance expected

Chancellor of the Exchequer, Alistair Darling, is expected to announce a state-guaranteed credit insurance scheme in next Wednesday’s budget.

Demand for such action has been increasing in recent months, with the Confederation of British Industry a leading voice.

The insurance protects companies when customers fail to pay or enter administration and claims have been rising sharply as the recession deepens.

Trade credit insurers are therefore behaving cautiously but widespread withdrawal or poor access to cover could threaten an already unstable economy.

The collapse of Woolworths at the end of last year was linked to the withdrawal of its credit insurance and last month, the Daily Telegraph reported that leading credit insurer Euler Hermes had advised some firms supplying Debenhams that the cover was no longer available.

Meanwhile, the Association of British Insurers has reported a 59% increase in credit insurance claims during the third quarter of 2008.