New Guidance on Trade Credit Insurance

Following reports that members were finding it more difficult to obtain trade credit insurance, The Builders Merchants Federation (BMF) has been working with members, the Department of Business and Trade, and the Association of British Insurers (ABI) to uncover the extent of the issues and provide guidance to help ameliorate their effect.

A survey of BMF members confirmed that credit insurance is recognised as a valuable business tool in the construction sector, with 45% of respondents using this solution.

The survey revealed other notable trends, including an inevitable hardening of the market over the past 12 months. Significant changes include increased insolvency activity and related business concerns for the year ahead.

However, despite the impact of bad debts due to insolvency, more than half of respondents have not experienced credit limit reductions.

When limits were reduced, respondents acknowledged the increased credit risk reported by their insurer and took appropriate actions.

The insurance industry is supportive of clients facing credit limit reductions, with 68% of respondents finding insurers receptive to appeals.

The insights gained from the survey provided valuable context on the current landscape in the building materials sector and informed the BMF’s detailed discussions with the ABI, which has led them to produce a guidance document specifically for the construction industry, which is fully supported by the Construction Leadership Council (CLC).

John Newcomb, BMF CEO said:

“Overall trade credit insurance remains an essential tool for our sector, with a significant portion of survey respondents expressing concern about bad debts affecting their business. 

We are pleased that the outcome of our discussions with the ABI provides new guidance which will help members when dealing with their trade credit insurance provider.”

Lucy Fraser, Senior Policy Adviser, General Insurance Policy at ABI said:

“Amidst challenging conditions, insurers are doing all they can to offer crucial support to businesses, with a 23% surge in claims paid by the close of last year. Our Guide for Construction is there to show how trade credit insurance can act as an essential lifeline for businesses and it offers guiding insights on what information an insurer will look for.”

The bespoke ABI Guidance Document can be downloaded from https://www.shorturl.at/zCET2