Majority of firms believe insurers are not assessing risk accurately and that the Government's top-up scheme should be extended.
According to the British retail Consortium's (BRC) latest Quarterly Credit Conditions Monitor, 38% of large retailers and 28% of small and medium-sized enterprises (SME) reported that the reduction or withdrawal of trade credit insurance has negatively impacted on their businesses.

The majority of respondents also feel that trade credit insurers do not asses risk accurately, with 92% of large retailers and 74% of SMEs believing this to be the case.

One retailer commented: "Apply industry-wide criteria to individual companies without looking at specific company circumstances. It is easier for the risk assessors to repeatedly say 'no cover' rather than argue for the insured company."

The BRC is calling for an extension on the top-up scheme cover period back to April 1, 2008, when insurers started to remove cover as the downturn started. The credit insurance top-up scheme was introduced by the Government in April, 2009 as a temporary measure that allowed businesses to purchase top-up credit cover via their existing insurance provider. The scheme currently covers credit reductions that have occurred since October 1, 2008.

According to the Credit Conditions monitor, almost all retailers surveyed, believe the top-up scheme has not gone far enough and 95% of SMEs and 85% of large retailers said that the scheme had yet to help their business. The BRC feels an extension in eligibility will make a real difference. However, the scheme is due to end on December 31 and a large number of retailers believe, to really help businesses, it should be extended beyond this date.

BRC business environment director Tom Ironside said: "It's vital to retain trade credit insurance - especially in the important run-up to [the] Christmas period and beyond. If trade credit insurance is withdrawn, suppliers demand to be paid upfront. This can cause cash flow problems for retailers, leading them to cut jobs and stock as they divert money to pay suppliers.

"Retailers are far from convinced that insurers accurately assess trade credit risks. The Government must put pressure on these companies to ensure proper research is undertaken so more accurate underwriting decisions are made."

He added: "The Government has made an attempt to help retailers through its top-up scheme. But to make a real difference, eligibility, needs to be extended to April 2008 - when the cover started to be withdrawn. The top-up insurance scheme is due to finish at the end of this year and VAT is returning to its higher level at the same time. To prevent the retail recovery and the three million jobs provided by the sector being undermined, the top-up scheme must be retained into 2010."