With the Covid-19 pandemic continuing and non-essential retailers being plunged into lockdown again, Insurance Times explores the implications and challenges that the insurance industry are facing 

Topshop, Warehouse, Oasis, Laura Ashley and Debenhams – these are just some of the UK high street retailers to collapse due to the fallout from the Covid-19 pandemic.

Despite the pandemic lockdown accelerating the already diminishing British high street for some, as non-essential shops shut and business is therefore reduced, there has been a shift in thinking around trade credit insurance (TCI) and premium finance.

Meanwhile for other smaller retailers and local high street shops, the pandemic has been fruitful as people continue to work from home.

At the beginning of 2021, the government’s Trade Credit Reinsurance Scheme (TCRS) was extended for a further six months until 30 June, as the prime minister Boris Johnson plunged the UK into lockdown yet again this January to mitigate the spread of the Covid-19. 

The scheme provides a reinsurance guarantee of up to £10bn for trade credit insurance during the pandemic. 

Trade credit insurance protects manufacturers, traders and service providers against buyers failing to pay due to various reasons, including bankruptcy, insolvency or delays. If this happens, policies pay out a percentage of the outstanding debt. 

With the shift towards online shopping exacerbated by the Covid-19 pandemic and non-essential shops remaining shut in lockdown, Insurance Times explores what the implications and challenges are for insurers and brokers, and whether premium finance could be a solution?

From bricks to clicks

One of the scheme’s participating trade credit insurers, Euler Hermes, has identified several structural switches that are “fundamentally changing” retail, such as the shift from “bricks and mortar” to “bricks and clicks”, with many relying on online shopping during lockdown. 

And the UK is fast becoming the most advanced e-commerce market, with a jump in retail e-commerce sales from 2019’s £104.92bn to £141.33 in 2020, according to eMarketer.

Despite this, Euler Hermes has predicted there will be an increase in insolvencies when the government’s TCRS ends.

Flemming Bengtsen, chief executive and founder at insurtech Nimbla, said the TCRS concluding would be a key date. 

“In addition to that, the temporary changes to the insolvency laws and Companies House filing requirements will all trigger jitters as we begin to process the extent and depth of the damage on private companies,” he added.

And Stuart Ramsden, regional director for UK and Ireland at trade credit insurer Atradius UK, warned: “The scheme is not a panacea and cannot ‘save’ every situation.

”While the path of the pandemic remains unpredictable, the six-month extension allows for further breathing space and is a realistic period of time to enable continuity of trade.” He said the vaccine added reassurance too.

Change of use

Owen Thomas, chief sales and marketing officer at Premium Credit, agreed that the high street profile is changing rapidly. 

Although a more positive facet, he said, has been the redevelopment of empty shops into new or split use businesses.

He added: “This change of use has implications for landlords, tenants and business owners with new and extended types of insurance required to provide cover for the newly introduced type of business. 

”In this situation, premium finance can provide a win-win scenario for the insurer, broker and customer.”

He explained that having a credit facility can help to spread the cost of insurance premiums into convenient monthly instalments, which can free up liquidity.

Similarly, Paul Trail, managing director of Close Brothers Premium Finance, stressed the importance of offering long-term commitment in the premium finance market, to help businesses survive.

“We have certainly seen an increase in demand for commercial insurance finance as business owners recognise that premium finance is one of a number of options that enables them to spread their insurance payment,” Trail added.


Meanwhile business is booming for smaller, local high streets as people continue working from home. One example of this is Simon Carter’s Menswear, situated on the Crystal Palace Triangle in South London.

The menswear chain has seen trading up by 20% during the pandemic. Last March, Simon Carter, the business’s creative director, penned an article arguing that “Covid-19 might be the saviour of the high street” - he still stands firm by this view. 

“We have been entering an age of more localised shopping, [with] the sense that ‘big is bad’ and ‘small is better’. 

People were coming into our shop and saying, ’we have lived here for four years, I knew your shop existed, but I have never had the chance to come and see it’,” he added.

He termed this phenomenon “hyper-localisation”, where local high street shops thrive as opposed to those in city centres.

He deemed the latter “doughnuting – where they are hollowed out in the centre, but you have this sugary bit at the edges. Small and nimble high streets will do well and will come out of this really strongly because these changes are now structuralised”.

Carter opened another shop in Chiswick just before Christmas and is looking for trade credit insurance for a new client.

This shift to hyper-localisation could be an opportunity for brokers.

Survival of the fittest

For Bengtsen, when it comes to the British high street, “it is survival of the fittest”. He predicted that survivors would be those that are reactive to controlling their operating costs and whose supply chains are adapting.

But concerns over unemployment and changing spending habits means retail sales may “remain subdued”, he added.

“Unfortunately, for much of the high street it will be too little too late. Online retailers will be far better placed to take advantage when sales do recover - most are expecting revenues not to recover until 2022 or 2023,” Bengtsen said.

“Even with rent renegotiations and store closures, bricks and mortar stores are going to struggle to compete.”

Meanwhile, Graham Walsh, the ABI’s senior policy advisor for general insurance, believes that maintaining trade credit insurance throughout the pandemic will be a “key component” for economic recovery post-pandemic.

However, even before the pandemic hit, some retailers were suffering. In October 2018, Debenhams had its trade credit insurance axed by Atradius.

At the time, a spokesperson for Debenhams said: “Credit insurers typically tighten cover when the retail industry is under pressure and this is an issue affecting many retailers.” January saw the 242-year-old retailer being sold with the planned closure for all of its stores. 

 What is the Trade Credit Reinsurance Scheme?

The Trade Credit Reinsurance Scheme (TCRS) was introduced by the government. It ensures that trade credit insurance and credit limits are maintained during the coronavirus pandemic, so that businesses can trade. It provides a reinsurance guarantee of up to £10bn for trade credit insurance.

It was originally introduced last May, and was initially due to run between 1 April and 31 December 2020.

Why was it extended? And how long for?

The TCRS was extended in January 2021, after the prime minister announced another full lockdown as cases of Covid-19 soared yet again. The scheme has been extended for six months until the end of June 2021.

The 2021 scheme was established by the government’s Department for Business, Energy and Industrial Strategy (BEIS); it will meet payment commitments through common law and under the authority of section 86 of the Coronavirus Act 2020.

The pandemic has seen businesses struggling to pay bills and there is a risk of credit insurance being withdrawn or premiums increasing to unaffordable levels – this could affect liquidity and business supply chains.

How does it work?

Trade credit insurance protects manufacturers, traders and service providers against buyers who fail to pay due to various reasons, including bankruptcy, insolvency or delays. If this happens, policies pay out a percentage of the outstanding debt. 

Individual businesses do not need to sign up for the scheme, as policies with participating insurers will automatically be eligible for inclusion.

But businesses should discuss their trade credit insurance needs with a participating insurer or broker.

The 2021 scheme will cover in-scope policy losses.

Who are the participating insurers?

  • American International Group UK Limited.
  • Atradius UK.
  • Coface UK Branch.
  • Credendo – short-term non-EU risks.
  • Euler Hermes UK, a branch of Euler Hermes SA (NV).
  • Markel International Insurance Company Limited.
  • Nexus Trade Credit.
  • QBE UK Limited and QBE Europe SA/NV.
  • Zurich Insurance.