New Government Trade Credit Deal Will Support Supply Chains
A new government credit trade deal has been given the go-ahead after many delays and months of waiting. This deal, called the Trade Credit Reinsurance Scheme, could reinstate cut credit limits. These were reduced by the CCEP when leading insurer Coface removed its cover.
The government announced on 4th June that all trade credit insurance would be underwritten to the amount of £10 billion, in order to keep supply chains operating. This deal has been approved shortly after that announcement. The new scheme guarantees that cover is underwritten and insurance companies can voluntarily sign up. The scheme will last until December of this year.
The aim of the scheme is to offer protection to the trade credit of businesses by providing insurers with a safety net. Therefore, industries that have been affected by the pandemic can continue to receive cover.
There have been large delays to this deal being approved due to the European Commission. This has unfortunately led to wholesalers having their credit limits slashed by CCEP.
They stated that their reason for doing this was the absence of a reinsurance scheme. But this government rescue scheme means that credit limits will be looked at again and reinstated by insurers. This is to follow the European Commission’s guidelines.
James Bielby, the CEO of the Federation of Wholesale Distributors said:
“While the scheme was welcome it still allowed insurers to cut cover given to suppliers to the wholesale industry. If trade credit insurance to wholesale continues to be withheld, the fragile recovery the sector is seeing will be put at risk.”
A spokeswoman for the Association of British Insurers stated:
“Insurers have been considering their involvement in the scheme, with a number of major providers having confirmed their participation,”. “The scheme is on track to ensure that widespread availability of cover can continue.”
There are some situations the government has highlighted which will allow an insurer to deny reinstating cover. This ranges from how well the business is performing to fraud.