Airmic calls on trade credit insurers to step up
The UK government’s extension of the trade credit extension scheme has been welcomed by Airmic, but the Association is now asking insurers to improve their own products as insureds struggle to find longer term appropriate cover.
The government announced in June that it would guarantee £10bn of trade credit insurance in a bid to shore up coverage for companies when customers go out of business before paying for products or services.
In May, Morgan Stanley had estimated insurers worldwide could have to pay up to $46bn in trade credit claims resulting from the pandemic. In the UK it is estimated 630,000 business buy trade credit insurance each year.
The trade credit scheme was due to expire at the end of 2020, but has now been extended until 30 June 2021.
Speaking to Commercial Risk Europe Julia Graham, Deputy CEO and Technical Director for Airmic, said the extension was welcomed but shortcomings remained in the trade credit products available in the market.
“For many businesses, the scheme itself will have made little difference to their covers. While this continuity has been the central aim of the scheme, its focus on capacity, rather than risk appetite or the suitability of products available, means that many buyers are still underwhelmed by the products and services that the market offers. The scheme does not address these issues,” she said.
“For example, trade credit products are too often unsuited to transacting cross-border business, so that some buyers still cannot contract in a manner that meets policy terms. Additionally, lack of industry collaboration means that inconsistent data and notification requirements between carriers results in inefficiency for policyholders, rather than a more streamlined process, putting an additional burden on insureds working with multiple carriers, which in turn reduces the product’s value proposition.”
The nine UK trade credit insurers covered by the scheme are AIG UK, Atradius UK, Coface UK, Credendo, Euler Hermes UK, Markel International Insurance Company, Nexus Trade Credit, QBE UK and QBE Europe SA/NV, and Zurich Insurance.
To read the Commercial Risk Europe article, featuring further comments from Ms Graham and Airmic CEO John Ludlow click here.