Call for Industry Feedback - Trade Credit Insurance
Please see below a Dear Colleague letter from the Office of Life Sciences
There is a call for industry feedback on whether companies are already seeing or otherwise anticipate risks to sales, purchasers and/or financing from a withdrawal or reduction of trade credit insurance coverage. One of our BEIS colleagues is helping the Business Growth team to get more evidence and is exploring this issue, as it has been a big issue in previous recessions and the CBI has reported many businesses (particularly SMEs) are being impacted by it right now. They are looking gather as much evidence as possible from across different sectors to establish the scale of the risk and also gain some insight in some case studies. We would be grateful if you are able to do raise the issue through regular conversations that you are having with members.
More context on the issue could be found at: https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/business-insurance/trade-credit/
Please find below some suggested questions that you could use. There is a lot of detail being requested here, but anything you are able to provide even at a higher level would be very helpful.
- Roughly what proportion of members are using credit insurance themselves or are part of supply chains where it is used extensively by suppliers or customers? If this can be broken down by business with policies to cover sales/suppliers have policies/rely on customer policies, it would be very helpful.
- If companies have a policy or policies to cover their sales….
- What proportion of members are making use of finance linked to trade insurance cover e.g. through invoice or inventory financing?
- If so, how much of their short-term finance needs are met by funding based on this cover?
- Do they have access to alternative financing [including new schemes related to Covid] to replace this?
- Would contractual terms of sale or heightened risk aversion prevent transactions not covered by the insurance anyway, regardless of a link to bank funding?
- Would members change payment terms to their customers if insurance is reduced or withdrawn? [shorten but still allow credit?; demand payment at point of supply or even in advance?]
- If cover was limited to 75% of current levels across all sales, what would be the impact on members’ businesses?
- If cover was limited to 25% of current levels across all sales, what would be the impact on members’ businesses?
- If members’ suppliers have policies to cover sales to them, what would they expect those suppliers to do if cover is reduced or withdrawn? What would be the impact?
- What proportion of members have already seen limits reduced or withdrawn on their business or on their customers, respectively, as a result of Covid?
- If they have not seen either so far, do they think this will happen? If so, when? [Within the next few weeks? After that? Not important now but will be when restrictions are lifted and demand recovers?]
- Has anyone already lost business or had a severe cashflow issue [i.e. one threatening jobs or even business viability] as a result of trade credit insurance issues linked to Covid?
Thanks and best regards,