Claims made on trade credit insurance rocketed in the last three months of 2008, new figures have revealed.

Credit insurance claims were up 51% year-on-year in October to December, according to the Association of Business Insurers, blaming a sharp rise in the number of businesses defaulting on payment or entering insolvency.

"Credit insurance became a standard working capital tool to manage cashflow and risk," said Eversheds corporate partner Robin Johnson.

"Any new customer you got, you took out credit insurance without looking at the terms - it was standard practice," he said. "As claims increased due to the growing number of failing retail businesses, the cover was withdrawn by the providers."

The worst of the withdrawals was likely to be over as companies started carrying out more detailed checks on their customers and bigger players offered help to their suppliers, he said.

"The larger retailers are starting to accept they need to support suppliers and accept that their credit or long-term plans are in fact an alternative to bank financing or a requirement for bank support," he said. "While it is taking longer than it should, it may be that the worst of the credit insurance withdrawal scandal is over."

However, the government aid on trade credit insurance covers only reductions made after 1 April.