Eligible businesses will be able to purchase ‘top-up’ credit insurance cover, under a new scheme launched by the Government.
The scheme is a short-term measure to provide real help to businesses, in the current economic climate, whose credit insurance cover has been reduced by their provider.
Trade credit insurance covers businesses against the risk of bad debt due to insolvency or protracted default of their buyers. It can provide a replacement of working capital when bad debts and late payments impact on cash flow.
What changes were announced on 9 June 2009?
The scheme has backdated eligibility for those companies who have had their credit limits reduced since 1 October 2008. These companies are now eligible for six month’s prospective cover, providing they meet the other eligibility criteria set out below. Up to 28 days’ retrospective cover can be purchased in circumstances where a business requires continuity of cover from a partial reduction made by insurers in the previous 28 days.
How does the scheme work?
The trade credit insurance (TCI) top-up scheme is open to eligible businesses trading in the UK, with a trade credit insurance whole-turnover policy. If your credit limit is reduced you can purchase top-up cover via your existing credit insurance provider, who will administer the scheme on the Government’s behalf.
For queries, complaints, or to apply for help under the scheme, you can contact your current credit insurance provider.
Key features of the TCI top-up scheme:
- It is open to new applicants until 31 December 2009
- It can be purchased in respect to reductions in cover that have occurred since 1 October 2008, with cover under the scheme backdated to start from when the reduction took place
- The duration of each policy, written under the scheme, is a maximum of six months
- The value of the cover you receive is determined by the level of cover provided by your underlying policy. If the level of your underlying policy changes during the six month period then the level of top-up cover will also change accordingly
- You can buy more than one policy. Each policy bought under the Government scheme covers your relationship with one buyer
Eligibility for the scheme:
- Top-up cover is available if you hold a whole-turnover trade credit insurance policy
- You trade within the UK with payment terms of no more than 120 days
- The level of cover being compared was in place for at least 30 days
- Your cover was reduced on, or after, 1 October 2008
- The reduction in cover was triggered by the credit insurance provider
- NB. This scheme does not cover exports
Level of cover provided by the scheme
You can buy insurance to the value of the lower of the following amounts:
- The amount equal to the level of cover, now offered under your credit insurance policy
- The amount which restores the level of cover to the amount you had previously
- Up to £1 million
For example, if cover provided by your underlying policy is reduced from £100,000 to £80,000 then you can buy top-up cover of £20,000 to restore cover to the original level of £100,000. If cover is reduced from £100,000 to £30,000 then you can buy top-up cover of £30,000, matching that of your underlying policy, giving you total cover of £60,000.
Top-up insurance is purchased as a six month policy at a price of 2% of the value of the cover.
Note: The trade credit insurance top-up scheme does not cover businesses where cover has been completely withdrawn by the credit insurance provider, unless it is partially reinstated and the other eligibility criteria apply.
Trade credit insurance providers who are currently operating the Government top-up scheme are:
- Atradius Credit Insurance N.V
- HCC International Insurance Company PLC
- It’s likely that other credit insurance providers will join the Government top-up scheme in due course
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