DEPARTMENT FOR
BUSINESS, ENTERPRISE AND REGULATORY REFORM News Release (2009/142)
issued by COI News Distribution Service on 1 May 2009
Firms suffering
from a reduction in credit insurance will from today be able to
purchase up to six months top-up cover as part of the
Government's trade credit insurance scheme, announced in last
week's Budget.
Under the scheme, which goes live today and runs until 31
December this year, suppliers will be able to purchase
Government-backed insurance to either restore cover to the
original level or double the amount they are able to obtain from
the private sector up to the value of £1m (whichever is the lower).
Companies from all sectors and from all stages of the UK supply
chain, which have suffered from a reduction in cover from 1 April
2009, will benefit from the increased certainty that this scheme
gives - providing real and targeted help for British Businesses.
The scheme was established in response to growing concern from
businesses that reductions in the value of insurance cover create
pressure on suppliers to shorten payment terms, and can place
additional pressure on businesses' working capital facilities.
Business Secretary Lord Mandelson said:
"The Government's Trade Credit Insurance top-up scheme
provides a lifeline for businesses to help them address the
specific challenges that they are facing as a result of the
reduction in trade credit insurance.
"This scheme is a targeted transitional measure to help
companies secure the cash flow they need and restore confidence
throughout supply chains. Risk is shared between Government and
the private sector striking the right balance between supporting
businesses and protecting taxpayers' money."
A maximum of £5bn of top-up cover for trade credit insurance will
be available through the scheme, which is part of the Real Help
package and will be delivered through the Working Capital Scheme.
To apply or for further information companies should contact
their trade credit insurer. Further information is also available
through Businesslink.
Notes to Editors:
1. Trade credit insurance contracts provide
suppliers insurance against the risk of a buyer defaulting on
their payment for goods after a period of credit. The product
helps give suppliers confidence to extend sometimes lengthy
payment terms to their buyers and banks the security to provide
working capital facilities. By offering suppliers protection
against financial loss, trade credit insurance is sometimes used
to support provision of financing products such as loans, invoice
discounting and factoring services. Reduction or withdrawal of
credit insurance can therefore lead to financial pressure on both
buyers (as suppliers may wish to shorten payment terms) and on
suppliers (due to its interaction with other financial products).
2. The three largest credit insurers (Euler Hermes, Atradius and
Coface) have agreed to offer the scheme to their eligible clients.
Scheme membership has also been opened up to other credit
insurance providers with whom Government is currently in
discussions. Eligible businesses should apply for the scheme
through their credit insurance provider.
3. In 2008 credit insurance firms insured over £300bn of
turnover, covering over 14,000 UK clients in transactions with
over 250,000 UK businesses.
4. Reductions in the value of insurance which have occurred since
April 1, 2009 will be eligible for the scheme, meaning some
businesses will be able to benefit from the scheme immediately it
comes into effect.
5. Further details of the scheme can be found on the BusinessLink
website at the following URL http://www.businesslink.co.uk/creditinsurance
6. On Tuesday April 21, the Association of British Insurers
released a Statement of Principles outlining the standards of
service customers can expect from their insurance provider. All
insurers offering the Government top-up scheme are required to
have signed up to the Statement. The Statement can be found at the
following URL http://www.abi.org.uk/Newsreleases/viewNewsRelease.asp?nrid=17616
Department for Business, Enterprise & Regulatory
Reform
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