In the 2009 Budget, on 22 April 2009, the Chancellor announced the introduction of a Government-backed 'top-up' trade credit insurance scheme aimed at addressing the challenges that UK businesses were facing as a result of the reduction in availability of trade credit insurance (the Scheme). The Scheme allowed a business to purchase an additional six months top-up cover if it had its trade credit insurance cover reduced by its insurer. For a link to our blogs on the Scheme please click here and here.
Following feedback from industry, the Government has proposed the following changes to the Scheme:
- the premium top-up cover is reduced from 2% to 1%;
- the £20,000 lower limit on top-up cover is to be removed;
- the limit on top-up cover will increase from £1million to £2million.
Uptake in the Scheme has been relatively low with just £7 million of cover out of the £5 billion available having been taken out by UK businesses.
Market data collected by the Government from the insurance industry and businesses have shown a decrease in the use of trade credit insurance as businesses continue to manage their credit risks actively.
The British Insurance Brokers’ Association (BIBA) issued a press release welcoming the changes proposed to assist the take up of cover under the Scheme. However, BIBA notes that there remains the issue of insurers withdrawing cover, rather than reducing limits, leaving businesses totally outside the scheme and it expressed concern that the scheme is due to cease in December. For full details of the BIBA press release click here.