Trade credit insurance Government Scheme FAQs
Following the launch of the Government's Trade Credit Insurance Support Scheme (Scheme), there are naturally a number of questions. Atradius, the insurer we work with have released some FAQs to help understand the Scheme a bit more. Please see below what they have shared with us.
The Scheme is designed to aid economic recovery and will provide a £10bn Government backed guarantee, covering up to 90% of B2B trade credit insurance transactions.
It runs from 1 April 2020 until the end of the year. The Scheme covers domestic and export trade for UK domiciled businesses. The reinsurance structure of the Scheme operates in the background for customers and brokers and means that credit insurance policies and all related processes and procedures (including for credit limits and claims) operate as normal.
About the Scheme
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What is the Scheme?
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The trade credit insurance industry, supported by the ABI has worked closely with HM Government to deliver an unprecedented programme of support to enable continued protection for trade receivables at this challenging time for business and our economy. The Government has pledged a guarantee of £10bn, which will cover insured losses for UK businesses. The Government's support is provided to insurers who participate in the Scheme via a reinsurance arrangement. A number of leading underwriters, including Atradius have committed to the Scheme.
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How long will the Scheme last?
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The Scheme period is 1 April 2020 - 31 December 2020. The Government and insurers have agreed to review the Scheme timetable in early autumn (September) and subject to prevailing circumstances, consideration could be given to extending the Scheme to include Q1 2021.
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What is covered by the Scheme?
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The Scheme includes risk attaching from 1 April 2020 until 31 December 2020, with payment terms up to 2 years potentially covered. Including pre-credit risk.
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Who is covered by the Scheme?
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The Scheme applies to existing customers and new business, and covers both domestic and export business. More specifically, it will cover insureds who are UK incorporated and non-incorporated entities domiciled in the UK, including UK domiciled subsidiaries of non-UK domiciled parents who are covered under a UK policy.
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Are all policyholders covered?
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The UK Government has committed to protect insureds who are UK incorporated and non-incorporated entities domiciled in the UK, including UK domiciled subsidiaries of non-UK domiciled parents UK corporates. Foreign joint or co insureds will not be covered under this Scheme.
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Is there an additional cost to be covered under the Scheme?
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The reinsurance structure of the Scheme means that this government support sits 'behind' us and it operates in the background, enabling policies to operate as normal. Accordingly, policies will be underwritten, priced and will operate in line with our normal processes.
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Do businesses need to apply to be covered by the Scheme?
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No. The vast majority of all policies issued in the UK will qualify and fall under the Scheme. Account Managers will advise at an individual customer level, where relevant, where policies issued in the UK do not qualify under the Scheme.
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What happens when the Scheme ends?
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We will be continuing to monitor all buyers in our portfolio and will keep our customers informed about deteriorating risks in the normal way.
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Risk
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Are all sectors covered by the
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There are no sector exclusions to the Scheme. We will continue to underwrite all buyers in line with our normal prudent underwriting standards. In participating in the Scheme, the Government expects us to maintain our robust risk analysis of our portfolio and we will continue to monitor and review buyers as normal to ensure that our customers remain protected.
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What will happen to limits already reduced or withdrawn?
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Atradius' strategy will continue to focus on demand and confirmed orders. Where limits have been reduced or withdrawn, customers with firm orders may reapply. We will underwrite positively if the only reason for a company being in temporary distress is Covid-19. However, where risks have already deteriorated significantly and the buyer unlikely to recover, limits may not be approved.
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If a credit limit is reinstated, when
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Under the terms of the policy, a credit limit must be established before the date of loss.
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Can I apply for a new limit with a new buyer?
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Applications for credit limits can be submitted in the normal way. In line with our customer focused, demand led strategy we will continue to prioritise firm orders. Decisions will continue to be based on the risk profile of the buyer. We will underwrite positively if the only reason for a company being in temporary distress is Covid-19.
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Will all my limits be covered under the Scheme?
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Domestic and export limits are covered by the Scheme.
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Will overseas firms be able to get cover on UK buyers under this Scheme?
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The Scheme is available to UK domiciled businesses only. There are however similar schemes in a number of other countries although not all of them include export cover.
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What (extra) information do you need to support a limit request?
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Credit limit applications can be submitted in the normal way. If you have a firm order from the buyer, you should include all relevant details.
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If you have adverse information on a buyer will you withdraw cover?
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We will continue to monitor our risk portfolio in the normal way. Where we have adverse information we will discuss exposure with customers in the usual way and advise where possible on mitigating actions. Where risks are negative and the buyer unlikely to recover limits may be withdrawn.
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Will you treat my export limits any differently?
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We will continue to monitor our risk portfolio in the normal way. Risk underwriters in other Atradius markets are informed about the Scheme.
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Are Discretionary limits still
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Yes. The terms of a customer's policy are unaffected.
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How will you underwrite buyers that have been closed due to Covid-19 and how will you treat overdues?
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Each buyer will be evaluated on a case-by-case basis using all available information, including the trading position prior to shutdown. Where there are monies owing, normal policy conditions apply and any outstanding amounts must be within the *MEP for trade to continue to be covered under the policy
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Will there be any changes for Hybrid policies - will non- cancellable limits be replaced with cancellable limits?
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This may be prudent in specific cases, but the Scheme encompasses cancellable and non-can limits so replacing is not a requirement of the Scheme
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Claims and Recoveries
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How will the claims process change?
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Insured customers should submit notifications of non-payment (NNPs) and file claims in the normal way using our online portal. Valid claims will be examined and processed for payment based on the policy conditions in line with our usual processes. Whilst payment authority remains with Atradius, the Scheme does naturally place audit obligations on insurers and the Government has been made aware that any reporting obligations should not materially impact the claims service to our customers.
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Will any additional information be required and/or will any there be any additional checks required prior to payment?
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Our usual examination processes will be followed and the current applicable rules and guidelines remain in place. The Scheme does naturally place audit obligations on insurers. The Government has been made aware that any reporting obligations should not materially impact our claims service to our customers.
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Will ex gratia payments be possible under the Scheme?
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Ex gratia payments can only be agreed at the sole discretion of the Government.
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Are there any changes in respect of recovery actions?
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No. Customers should continue to operate their policy in the normal way including loss minimisation.
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What is happening about extended reporting periods?
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The previously advised flexibility regarding extended reporting periods is unchanged and remains in place for receivables where the expiry of the maximum extension period is reached before 1 September 2020
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* The Maximum Extension Period is the period after the due date of payment during which time you can continue to trade insured, providing you are not aware of any event likely to give rise to a loss. At the end of the MEP, you should put the account on stop and notify us accordingly. If you do become aware of any event likely to give rise to a loss, you should notify us immediately
The key message is to reassure you that the Scheme is structured in such a way to enable Atradius to operate as they normally do - there are no 'special' actions required of insured customers and policies will run in the normal way. Should you have any further questions, please do not hesitate to contact us.
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