On 22 April Business Secretary Lord Mandelson announced that businesses would be able to purchase top-up trade credit insurance if the level of cover provided under existing policies has been reduced. This arrangement is part of the Working Capital Scheme set up by the UK Government to boost the availability of credit to small businesses.
The scheme will operate from 1 May until 31 December 2009. However cover can be backdated to 1 April 2009 where an existing policy’s cover has been reduced after that date.
Under the scheme additional cover, backed by the UK Government, will sit on top of an existing credit insurance policy for a period of 6 months. The policy will be on exactly the same terms and conditions as the underlying cover and businesses wishing to purchase the top-up cover should contact their existing credit insurance provider to arrange the top-up.
The scheme has been introduced in response to growing concerns about how a reduction in credit insurance cover is affecting businesses’ working capital facilities. Trade credit insurance protects against buyer default or insolvency after a period of credit. Without the comfort of trade credit cover many businesses are under pressure to shorten payment terms with suppliers or restrict who they can do business with.
On 21 April the Association of British Insurers (ABI) released a statement of principles which outlined the standards of service which businesses can expect from trade credit insurers. Any insurers who wish to participate in the top-up scheme must sign up to the ABI’s statement of principles.
For further information on how the scheme operates go to the businesslink.gov.uk website.