LONDON, 31 December 2020 – The UK government, the Association of British Insurers (ABI), Euler Hermes – the world’s leading trade credit insurer – and other underwriters have agreed to extend the landmark State Support Scheme to protect intercompany trade into 2021.
- UK government and trade credit insurers extend support scheme to 30 June 2021
- Provides ongoing support for businesses facing Covid-19 disruption
- Business insolvencies forecast rise in 2021
The deal will see the government’s guarantee for up to £10 billion of credit insurance transactions continue for a further six months through to 30 June 2021. The extension enables insurers to continue to provide extensive cover to their clients, which helps UK businesses to trade in the face of the ongoing challenges and insolvency risks to supply chains posed by Covid-19.
Euler Hermes forecasts the phasing out of broad-based ‘temporary’ support measures during 2021 is likely to trigger an increase in insolvencies in 2021. As a result, their global forecast is for insolvencies to rise significantly (+25% y/y). The company’s Global Insolvency Index for 2021 could be as much as 13% higher than in 2019, prior to the crisis, and 2022 would be 27% higher than in 2019.
The State Support Scheme is currently in effect from 01 April to 31 December 2020. The UK’s trade credit insurers will continue to make a significant contribution to the scheme; ceding 90% of premium to the State. Both domestic and export B2B transactions of UK domiciled companies continue to be covered.
Milo Bogaerts, chief executive of Euler Hermes UK and Ireland, said:
“This is an important signal that both the government and the insurance industry continue joining hands to protect businesses. By reducing the risks associated with late or non-payment we help our customers boost liquidity and preserve intercompany credit, and hopefully support long-term economic recovery when it comes.”
Trade credit insurance protects B2B companies against the risk of non-payment and indemnifies a policyholder in the event of an unpaid invoice by their customers (‘the buyer’). Thanks to the state support scheme, credit-insured companies will continue to be shielded from deterioration in their buyers’ credit worthiness brought about by the crisis. It will also ensure that a number of buyers which experience temporary difficulties due to Covid-19 do not face an additional strain from reduction in supplier credit available to them, offsetting some of the domino effect that payment defaults can create across the supply chain.
Milo Bogaerts added: “Businesses in many sectors face the very real threat of unpaid invoices and insolvency but, in collaboration with government, we continue to play our part in providing them with the tools to overcome current difficulties.”
The UK’s trade credit insurers provided cover for £171bn of business activity, covering 13,000 suppliers and 650,000 buyers, according to the ABI.
