Outgoing ABI director general says the scheme is an ‘excellent example’ of how the government and the insurance industry can work together
The ABI has confirmed that the temporary Trade Credit Reinsurance (TCR) scheme will close on 30 June as planned.
The TCR was implemented as a temporary solution for companies struggling to get insurance cover for transactions due to the Covid-19 pandemic.
The scheme directly helped more than half a million UK businesses by providing financial certainty and safeguarding jobs. It protected more than £575bn of business turnover, offering around £210bn in insurance cover.
Insurers participating in the scheme have indicated to the government that it is no longer required, so they are therefore keen to take back full underwriting control.
Huw Evans, outgoing director general of the ABI, said: “Insurers were pleased to have worked closely and constructively with the UK government on this temporary scheme.
”At a time when firms needed extra support during the pandemic, the scheme has helped ensure that businesses remained able to insure against potential risks in their supply chain.
“The scheme has been an excellent example of how government and the industry can work together on solutions to unprecedented market challenges to ensure the continued availability of insurance.”
The government and participating insurers will continue to work together to ensure a smooth transition.
The scheme offered eligible insurers a government-backed reinsurance agreement, covering insurance offered on business transactions within the UK and overseas.
This helped to enable trade, which requires insurance - some businesses may have previously been unable to obtain this cover due to the uncertainty caused by the pandemic.
While the TCR is being wound down, insurers have committed to:
- Continue to work closely with policyholders and their clients to understand their insurance needs, whilst proactively seeking out relevant information to inform underwriting decisions.
- Give adequate consideration in underwriting decisions to a business’s plans for recovery and prospects for future growth, as well as the impact of the pandemic on different sectors and the ongoing nature of government support.
- Continue to communicate the rationale behind underwriting decisions transparently and in good time.
Stuart Ramsden, regional director UK and Ireland at trade credit insurer Atradius, said: “The government was fast to recognise the essential role trade credit insurance plays in enabling trade, protecting businesses from the risk of non-payment. The TCR scheme was revolutionary in terms of the blanket support it provided for the industry, enabling insurers to maintain underwriting stances on limits which would otherwise have been unfeasible due to the pronounced economic impact caused by Covid-19. This ensured the lifeline of non-payment protection has remained in place for businesses.
”As the lockdown of businesses eases and we see the signs of economic recovery, with the scheme coming to an end, we are confident there will be a smooth transition for our customers. We constantly review our risk portfolio to ensure we are providing the best protection for customers and this has continued throughout the pandemic. Therefore, after the scheme ends, we do not expect to see significant changes.
”In today’s uncertain climate, trade credit insurance has never been more vital and this is increasingly being recognised by businesses who are working with us to develop robust trade strategies to seize opportunities and mitigate risk with the buffer of protection from non-payment.”
Huge success story
The government will now begin work on a review of the trade credit insurance market, to ensure fair outcomes for consumers.
John Glen, economic secretary to the Treasury, said: “This scheme has supported millions of jobs at over half a million businesses by giving companies and their supply chains confidence through the pandemic.
”It has been a significant success, providing nearly £210bn of cover, and it’s right that trade credit insurance transitions back to the industry now the economy is starting to recover.”
Following this decision, the government has committed to:
- Maintain an open dialogue between insurers and businesses, working collaboratively with both to help ensure the smooth transition of cover back to the private sector.
- Continue to monitor the levels of insurance cover within the market.
Business minister Paul Scully said: “The TCR scheme has been a huge success story, with the government and insurers working closely together to back more than half a million businesses, protecting jobs and providing confidence through the pandemic.
“The scheme allowed trade to continue flowing despite the uncertainty caused by the pandemic and it is only right that now our economic outlook has improved and businesses are getting back on their feet, the private sector resumes its role of providing insurance cover.
”I look forward to continuing to work with insurers to deliver the support which businesses need.”