Data and analytics firm GlobalData has said that the UK re/insurance industry could be boosted if the government decides to implement a trade credit reinsurance backstop scheme for the duration of the coronavirus (COVID-19) pandemic.
Sources said earlier this week that insurers are discussing a new scheme with the Treasury and the Department for Business, Energy and Industrial Strategy that would prevent the widespread withdrawal of cover across sectors such as manufacturing and retail.
The backstop could reportedly last through into the recovery phase of the pandemic, with the cost of the scheme likely to reach into the hundred of millions, or even billions, of pounds.
“The reinsurance scheme aims to prevent the widespread withdrawal of cover across sections such as manufacturing and retail,” said Ben Carey-Evans, Insurance Analyst at GlobalData.
“The bill is expected to run into the hundreds of millions at least and will be extremely beneficial to the insurance industry and small businesses. Since COVID-19 was declared a pandemic, many insurers have withdrawn products in particularly risky lines.”
Carey-Evans explained that trade credit insurance is particularly important at the moment due to the number of businesses closed due to the pandemic, but added that it is also very risky for insurers.
However, he believes that a backstop scheme would “allow insurers to continue offering trade credit to customers, safe in the knowledge they will have the government behind them as reinsurers.”
GlobalData’s Solvency II Performance Analytics shows that Allianz is by far the leading credit and suretyship insurer in the UK, followed by Tokio Marine and Zurich.
“This is a key line for Allianz, so being able to continue the offering, maintain its client relationships and help its customers pay their bills will be a significant boost to the insurer,” Carey-Evans added.