Trade Credit Insurance (TCI) is a vital lifeline in the finishes and interiors sector, giving businesses throughout the supply chain the confidence to trade with one another. The coronavirus (COVID-19) pandemic has created problems for many businesses. Given the sudden disruption to economic activity, reduced cashflow and the resulting increased risks of insolvency and default in the market, businesses have seen trade credit insurance withdrawn, premiums increasing significantly, or the level of cover offered reduced. The withdrawal of cover could cause further difficulties for businesses, by placing pressure on liquidity, necessitating changes to payment terms, and depriving SMEs in the construction sector access to trade credit, on which they depend.
TCI provides protection for businesses when customers do not pay their debts owed for products or services. A TCI policy will reimburse the policyholder in the event of the buyer’s non-payment, up to a certain credit limit set by the insurer. This form of insurance can prevent the negative impact of non-payment from having a ‘domino effect’ along construction supply chains.
On 4 June 2020 the Government announced the temporary Trade Credit Reinsurance Scheme. The Construction Leadership Council (CLC) welcomed the announcement in a press release. The Scheme is now operational and final details, including participating insurers has been published on GOV.UK.
The Insurance and Surety Working Group for CLC COVID-19 Task Force has produced this summary guidance to support businesses in the construction and maintenance supply chain, including builder’s merchants, electrical wholesalers, manufacturers and suppliers. This guidance aims to provide practical advice and considerations for discussions with brokers and insurers when seeking TCI. It also provides an outline of the TCI reinsurance scheme between government and available insurers.
Read the full guidance here.