Trade credit insurers are providing more cover to businesses than ever before, insuring turnover worth £315 billion in 2014, according to the ABI.
This is a 6.6% increase in turnover insured from the previous year. However, the average premium for a trade credit insurance policy has fallen by more than 2% over the same period. Trade credit insurance promotes financial growth by giving businesses the confidence to extend credit to companies they are trading with.
Last year, businesses took out almost 10,600 trade credit insurance policies to protect themselves against the financial distress of a trading partner. While turnover insured was higher in 2014, businesses made over 10,300 claims on their insurance, a 1.9% decrease from the previous year. The ABI said this reflects improvements in the UK economy, with total company insolvencies in England at the lowest level since 2007.
Trade credit insurance also facilitates international trade by helping businesses to manage increased risks that come with exporting. Total trade exports have increased by 4% since last year.
In 2014, small businesses made more than 3,900 claims, accounting for 38% of the total claims made to trade credit insurers. Insurers paid out £30.2m to these businesses, 25% of the total amount, which was worth £120m.
Trade credit insurance provides value for money for small businesses in particular, who receive 25% of the total value of claims received, but pay just 12% of the total premium.
Mark Shepherd, manager for general insurance policy at the ABI, said: “Trade credit insurers are covering a record £315 billion worth of turnover for UK businesses, protecting them against the financial risks of trading. Without this insurance in place, companies are at risk of large financial losses, and potential job losses if a company they are supplying gets into difficulty. As the UK economy improves, trade credit insurance provides reassurance and encourages businesses to expand, supporting sustainable growth.
“Trade credit insurance is particularly valuable for small businesses that are looking to grow by protecting their supply of goods and services on credit to their trading partners. This insurance can improve access to finance, and credit insurers work with their customers to help them understand and manage their risk when trading with other firms.”