Question to the Department for Business, Energy and Industrial Strategy:

To ask Her Majesty's Government what risk assumptions they will use in the pricing of reinsurance offered to trade credit insurers; and what commitments they have obtained from these insurers to maintain cover.

The Trade Credit Reinsurance Scheme operates as a reinsurance agreement which will see trade credit insurers continuing to write and maintain cover to businesses affected by the Coronavirus pandemic. The cost to insurers of participating in the scheme is ceding 90% of their premium income to Government, with 35% returned to cover their costs. The retention of 10% income by insurers ensures alignment of incentives so that underwriting standards and pricing approaches are maintained in line with normal market conditions. Losses are also being shared with Government taking 90% and insurers 10%, up to a £3 billion cap. Losses between £3 billion and £10 billion will be 100% covered by Government. Insurers will offset the 10% of premium they retain against their share of the losses.

The Scheme will see the vast majority of TCI cover maintained in the market. The reinsurance agreement requires insurers to maintain cover where there are reasonably identifiable Covid-19 related economic impacts on an in-scoped insured. Where there are no identifiable Covid-19 related economic impacts, participating insurers will continue to act according to their existing underwriting practices. BEIS’s delivery partner will have oversight of insurers throughout the scheme and monitor their behaviour to ensure that underwriting standards and prices are maintained.