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ARTICLE · 14 MAY 2020

COVID-19 And Trade Credit Risk

Mayer Brown
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COVID-19 is causing widespread disruption to businesses in all sectors. In particular, we are seeing temporary closures in the retail and leisure sectors and shutdowns of factories by...

United KingdomCoronavirus (COVID-19)
Jane Childs
Jane Childs
Matthew Knight-Olsen
Matthew Knight-Olsen
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COVID-19 is causing widespread disruption to businesses in all sectors. In particular, we are seeing temporary closures in the retail and leisure sectors and shutdowns of factories by manufacturing business.

As flows of trade are disturbed, and in some instances, dry up, it seems inevitable that companies and their banks will be looking to their trade credit insurance policies to see where loss can be recovered and what steps they need to take to comply with the terms and conditions of these policies. Here, we review some of the considerations for insurers and policyholders during the current pandemic.

We expect to see a large number of businesses in financial distress over the coming weeks and months. Trade credit insurance issues will most likely arise for companies that have purchased raw materials and components, but who now cannot sell finished product and, therefore, do not have the cashflow to meet their obligations to suppliers. Defaults driven by a

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