UK regulator ABI backs 'vital' reinsurance backstop for COVID-19 pandemic

The Association of British Insurers (ABI) has welcomed the move to develop a UK government-backed temporary reinsurance scheme to help businesses recover from the impacts of COVID-19 pandemic, noting that it is a "vital protection to help minimise the knock-on effects of the challenging economic circumstances".

ABI believes that the scheme could help speed up the economic recovery by ensuring continued access to trade credit insurance during the unprecedented financial circumstances. It will allow businesses to continue to access cover against the risk of supply chain insolvencies.

The association highlighted that similar actions are being taken in other European countries, and Canada, where state-backed schemes have been developed to help businesses continue to benefit from affordable trade credit insurance protection.

ABI said that it will work with the Government to develop the scheme, so that businesses can trade with confidence despite the challenging economic circumstances.

According to the association, the Government-backed temporary scheme will ensure that trade credit insurers can continue to provide cover for businesses across the country by taking on more risk than they otherwise would have been able to.

"As we emerge from lockdown and restart the economy, we have worked with Government to outline the difficult trading environment that lies ahead, and this Government-backed scheme, once implemented, will help businesses and their supply chains get back on their feet," said James Dalton, ABI’s director of general insurance policy.

Dalton added: "This is a welcome step by the Government, which mirrors similar action being taken by other countries across the world, which are facing the same issues as the UK trade credit insurance market in these exceptional times. If developed in the right way, this temporary scheme will give reassurance to the thousands of businesses who rely on the security that trade credit insurance cover provides.

"The scheme could help protect the supply chain, safeguard jobs and kick start the economy, boosting business confidence as we begin to emerge from the dark shadow of COVID-19. The priority now is to urgently work through with the Government how this scheme will operate in practice so that it can support businesses through the difficult trading environment, now and in the months ahead.”