“A prolonged period of economic uncertainty means that businesses continue to face a challenging trading environment, so it is not surprising that there is greater focus on the benefits of trade credit insurance.”
Those were the words of Association of British Insurers (ABI) policy adviser Graham Walsh in January when the trade body released trade credit insurance figures. Just imagine how much more crucial it is to have trade credit insurance now, given the coronavirus crisis.
According to Sky News, it’s been confirmed that the government is exploring a potential trade credit insurance guarantee scheme. Citing sources, the report said the talks with insurance stakeholders are at a detailed stage and could result in a reinsurance backstop not only during the COVID-19 pandemic but possibly for the period of economic recovery.
An ABI spokesperson told the news network: “Insurers work closely with their customers, discussing with them where credit limits can be adjusted to help avoid bad debts, but this cannot happen where there is likely to be a sharp rise in insolvencies across many business sectors, such as from COVID-19.”
To avoid the massive reduction in the availability of trade credit insurance, the ABI representative said they “are discussing with the government the scope for temporary state support to ensure that businesses can continue to obtain cover that meets their needs.” Essentially, if the plan pushes through, the government will be providing reinsurance.
Meanwhile, in a separate development, Lloyd’s of London is said to be in talks with regulators and the government for a possible backstop aimed at insuring future pandemics. According to a Reuters report, Lloyd’s is currently gathering business interruption data from members of the insurance marketplace as the idea of ‘Pandemic Re’ is put forward.