Reacting to the announcement by the HM Treasury that the UK government will temporarily act as the reinsurer to guarantee business to business transactions currently supported by Trade Credit Insurance Nigel Birney, Head of Trade Credit at Willis Towers Watson in Belfast said:
“This announcement by the UK Government is important news and could provide very welcome relief for many NI businesses who trade both domestically and internationally as we look to rebuild the NI economy.”
“The increase in risk caused by Covid-19, and the unprecedented level of expected claims, has forced underwriters to rebalance their risk portfolios and guide their clients by reducing or completely withdrawing cover on many companies in Northern Ireland, the Republic of Ireland and other export markets. If this government support is confirmed it will provide a much needed boost to the local economy by maintaining and sustaining credit lines for many NI businesses.”
“Not only does Trade Credit Insurance provide financial protection by helping businesses to grow safely, but crucially it also underpins many working capital facilities. Access to such facilities will be vitally important as businesses begin trading again.”
“When Trade Credit Insurance cover is reduced or withdrawn it causes disruption to supply chains, as credit lines are removed and businesses are left exposed to unacceptable credit risks of non-payment or bad debt it puts strain on cashflows. It is one of the main reasons that otherwise good businesses cease to trade. As the largest credit insurance broker in Ireland, we have a strong sense of what is going on within the credit insurance industry and recently it was becoming an increasingly grim picture.”
“Over the last number of weeks other Governments across Europe have introduced credit insurance guarantee schemes to support domestic and international trade, which we broadly welcomed and for which we strongly lobbied, but it caused further anxiety for NI businesses, if we did not have similar support. We could potentially have had the unpalatable situation whereby a company in Ballymena would have been unable to get insurance on a business in Portadown, because the UK insurer is uncomfortable with the risk profile of the buyer, yet a supplier in Germany could sell to the same buyer in Portadown and the debt would be insured under the German Government backed guaranteed scheme.”
“As Credit Insurance is an integral part of risk management for many companies there is much relief within the Northern Ireland business community that this government backed scheme is being introduced, and if implemented in full, would mean that local Norther Irish companies should be able to trade with confidence at home and abroad ,on a level playing field, protect themselves against bad debt and secure their cashflow. We look forward to the full details of the scheme being disclosed.”