Trade Credit Risk

We glance across the pond today where the UK government announced in the Budget that it will offer a temporary top-up scheme for companies struggling to get trade credit insurance amid the economic downturn. According to latest reports, the scheme will provide up to  £5 billion ($7.2 billion) of additional trade credit insurance to businesses that have suffered reductions in their level of insurance cover. Trade credit insurance – which protects businesses against unexpected credit losses due to default or insolvency of their own customers (i.e. buyers) – is another key example of how insurers support the economy. The Association of British Insurers (ABI) just reported that the number of trade credit insurance claims in the UK rose to 8,366 in the fourth quarter of 2008, up 51 percent from 5,540 in the fourth quarter of 2007. The value of claims incurred in 2008 was  £360 million ($520 million), up from  £257 million ($371 million) in 2007. At the same time, the total value of turnover insured increased to  £302.5 billion ($438 billion), up from  £282 billion ($408 billion) in 2007. As the ABI noted, this demonstrates the commitment of trade credit insurers to support their clients when trading is difficult by providing them with as much cover as possible and carefully monitoring their risks. For more on how insurers support the U.S. economy, check out the I.I.I. online publication A Firm Foundation.  

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