The Chancellor Alistair Darling is expected to announce a temporary credit insurance guarantee scheme worth £5 billion in tomorrow’s Budget after the government struck a deal with insurers Atradius, Euler Hermes and Coface.
The deal will see the government provide supply chain guarantees worth up to £5bn which wil be matched by an equal figure form the credit insurance industry.
Suppliers will have to pay a levy of 2% on the assets they want to insure for six months. The scheme will come into effect on May 1 and will be open to applications until December 1 but will only be available to suppliers who have seen their cover reduced rather than withdrawn completely. The scheme will also only be available to companies whose credit insurance cover was reduced after April 1.
The British Clothing Industry Association (BCIA) sent a letter to Peter Mandelson, secretary of state for enteprise and regulatory reform, earlier this month detailing the problems faced by the fashion industry because of the lack of cover. Drapers has been campaigning with the BCIA to get the government to launch a scheme to help suppliers who have suffered as a result of the credit insurance crisis.
The Association of British Insurers (ABI) has also published a list of rules to govern the trade credit insurance industry. The ABI’s Statement of Principles outlines how insurers should operate and what companies should expect from them. All the major credit insurers have signed up to the principles.