An emergency reinsurance scheme set up to cover billions of pounds-worth of transactions during the coronavirus crisis should be extended until the middle of next year, food industry chiefs have urged the government.
Sky News has seen a letter signed by trade association bosses including Ian Wright, chief executive of the Food and Drink Federation, which warns that the recent resumption of stricter lockdown measures has triggered a new tide of insurance cover cancellations.
In the letter to Alok Sharma, the business secretary, more than 20 industry bodies called on ministers to extend the trade credit insurance scheme introduced in September by at least six months.
Trade credit insurance provides cover that pays out if a customer defaults on payment, and its withdrawal frequently hastens the collapse of companies in sectors such as retailing.
“The government’s intervention has meant that despite…unprecedented market conditions, suppliers and customers have been able to access an appropriate level of cover.
“Government underwriting of the insurance market has provided comfort both to insurers and to their customers,” the letter said.
The signatories added that ending the scheme prematurely could have a serious impact on Britain’s food supply chain.
“A recent FDF survey found that over half of suppliers would be less likely to trade with a buyer in the absence of trade credit insurance or if their insurer was not willing to provide cover for that buyer.
“With the recent tightening of restrictions, businesses are already seeing insurers reducing and cancelling cover again for some customers.
“Businesses are also experiencing rising costs of insurance with severe limits being placed on the amount of debt covered.
“As such, without continued underwriting from government, there is a real risk that the floor will drop out of the trade credit insurance market and suppliers will again face a highly damaging situation with insurers withdrawing cover for the food and drink supply chain.”
In their letter, the food industry bodies said there was evidence that some insurers – which they did not identify – were not using the government scheme, and urged the government to “encourage” them to do so.