17th April 2020

Coronavirus: The financial protection of Trade Credit insurance

By Dean Smith
Client Director
Trade Credit Insurance Covid-19

Trade Credit Insurance enables you to do business in the knowledge that, if your customers don’t pay, you have a back-up plan in place. It provides you with financial protection as well as a range of other benefits.

The speed and severity of the spread of Covid-19 means businesses are facing unprecedented challenges. With the situation changing daily, it’s apparent that a wide range of impacts are being felt across a variety of sectors, with many of them already in fragile circumstances before the current pandemic began.

Sectors which were already struggling to keep their heads above water will be put under further pressure, and any subsequent recession, on a country-wide or worldwide scale, will further exacerbate the likely numbers of insolvencies, which in turn will spark an increase in claims.

Those sectors worst hit are the ones in which many insurers already had a cautious approach. This includes retail, leisure and consumer electronics, in which insurers are anticipating a drop in consumer demand. Though the UK Government has been putting in place measures to help companies in those sectors – many of which have been positively received – support offered on a global scale will vary widely. Those same sectors are also exposed to reductions in the supply chain. Though some of those companies will be able to benefit from the schemes made available to support business, the UK Government has had to move further to make sure they are as easy as possible to access.

Insurers are already finding ways to help customers through the current situation by putting in place measures to support them when they feel under pressure. Within UK businesses, increased financial strain will manifest itself in the form of more insolvencies, particularly in light of the continued constraints being placed upon each of us as the Government has put in place measures designed to slow down the spread of the virus.

With credit insurers facing the threat of increased payment defaults, most insurers are already giving insured buyers extended time to pay or issuing guidelines on altered terms. The Aston Lark team is here to pass on those benefits, and we’d encourage people to contact us when it comes to obtaining information about what your insurer might be able to do to help you.

We are here to help.  If you are concerned about payments due from buyers, whether you already have Trade Credit Insurance or would like to see how it could help protect your business, call us to discuss the options available.

Impact on insurance markets

It is apparent that the capacity and availability of Trade Credit Insurance will reduce, particularly in sectors where there was already high risk. When supply chains are hit, the severity of which will vary depending on the sector, then the availability and cost of Trade Credit Insurance will vary too.

Insurers are trying to help. Certain insurers are willing to give more time for insured buyers to pay, meaning businesses will have extended time to work out how they can put in place a proactive process that will ensure they continue to be covered during the trying months ahead.

Insurers are also still offering quotations and issuing updates on policies, and we would encourage customers who feel exposed to the current situation to always contact us in the first instance so that we can best manage arrangements.

We will continue to monitor what is a very fluid situation. If you can ensure you spread the cost over the period of your insurance, then that should form part of your risk management process.

If we run into a global recession then it can be expected that levels of financial stress will cause the number of insolvencies to rise even further, particularly amongst smaller businesses. Trade Credit Insurance is there to absorb part of that shock, so again it’s always worth talking to our team to see how we can help:

Dean Smith (Client Director)
[email protected]          
Mobile 07551 156 810

Georgina Hinton
[email protected] 
Telephone 0121 452 8707
Mobile 07535 920 812

Harry Nelson      
[email protected]        
Telephone 0121 452 8719

Surety

Surety business has a strong focus on the construction sector, which is already under considerable strain owing to the wider economic situation. Given the likelihood of more insolvencies, the availability of sureties will fluctuate. The construction sector has seen different restrictions imposed upon it during the Covid-19 crisis, which makes it difficult at this stage to make predictions with any great accuracy, as much will depend on the length of time those restrictions remain in place.

Due diligence procedures may incorporate additional elements to those normally required, as issues such as the financial strength of the company, the availability of cash, internal procedures and business plans would all be under scrutiny from Surety companies.

Our advice is: speak to us first – we are ready to help.