Trade credit insurance
Export credit insurance (or export insurance) is the collective term for various forms of insurance that will underpin the export risks of default on receivables from deliveries of goods and services.
General
Export-oriented countries have an interest in that exporters can export their goods and services without interference. Exporters take as suppliers a true believer function, where the typical creditor risks posed by cross -border exports added also country risks. These are composed of a stop transfer risk and political risk. The States use to hedge these particular risks mostly independently organized ECAs (export credit agencies, ECA), the award delivery- a warranty / guarantee of the state. These are similarly organized insurance agencies - usually on a statutory basis - specific export transactions guarantee ( " take cover "). The thus favored exporter receives as a result of non-payment in case the damage caused by the ECA - to a deductible of between 5 % and 15 % of the order value - replaced. In this way, exports are made possible that would without insurance mean an excessive exporter risk and therefore does not take place.
Because you can hardly realize export business with longer repayment periods and / or with difficult markets to hedge against these specific risks are all western industrialized countries, but also some developing and emerging countries on state export credit insurance schemes to assist the exporters in their country. Thus, the export credit insurance is an important state instrument of export promotion. Export credit guarantees are therefore insurance for export transactions by which a payment default for economic or political reasons is avoided. The ECA 's are predominantly economically insurance rate because their business with default probabilities of claims and probabilities has to do of sovereign risks.
Types of Insurance
In order to hedge the export credit risks private credit insurers or state credit insurance can be switched on. The state insurers are mostly independent, privately organized companies that are working on behalf of the respective state ( mandatories ). In Germany, the Euler Hermes Credit Insurance is leading authorized by the federal government to make all declarations concerning the export credit guarantees in the name, on behalf and for the account of the Federal and accept. For this reason, has been colloquially called " Hermes cover " enforced. Hermes offers simultaneously as insurance on their own account and is thus also active as a private credit insurer. The differences between private and public export credit insurance are primarily in the scope of coverage of the insured business while the insured is involved in incoming damage regularly with a so-called deductible ( an uninsured deductible) in both species.
Private and public export insurance
An examination of the private and state insurance with respect to the insurance coverage, the private export credit insurance policies cover only the default risk of the exporter in case of insolvency of its customer. Under certain conditions, the risks of late payment as well as the manufacturing risk of the exporter and the demand risk in non-acceptance of the goods can be insured. The private export credit insurance cover therefore only from the economic risk in countries with stable economic and political conditions.
The coverage of political and transfer risks stop ( country risk), however, is ruled directly by the private credit insurance in the policy conditions or indirectly by the fact that supplies to importers in certain high-risk countries or groups of countries are not insured. According to this principle the state should intervene only where the private sector certain functions may not take or want. This is the case in the adoption of country risks.
Types of insurance risk
From this it is seen that in the area of export transactions appear a variety of risks that can be systematized as follows:
- Manufacturing risk
The manufacturing risk occurs when political or economic circumstances abroad prevent the production or shipment of the goods. Also, the risk of an embargo is protected herein. In the manufacturing risk cover the guarantee applies to losses incurred cost incurred by the exporter by early termination of the contract. Manufacturing risk cover include the actual cost of the exporter. These are estimated by him previously and be based on the cover as a maximum.
- Export risk
Meeting the export risk protects the exporter for the period between the dispatch of the goods or the beginning of the service and the input of export demand. Herein, the risk of insolvency of the importer is also protected. The Insolvency (credit ) risk is therefore part of the export risk. Also, the " protracted default " is covered with.
- Financial credit risks
These occur when a domestic credit institution at the request of the exporter to the foreign importer to deliver a bonded loan due to the export business grants (so-called buyer credit ). The credit cover then secures the financing bank loan repayment plus interest of the loan granted to the importer.
- Political Risks
State / government action, acts of war, rebellion or revolution (so-called " general political loss event ' ), stop transfer (not feasible conversion or restriction of the transfer of the funds by the debtor in national currency by restricting the intergovernmental payments ), impossibility of performance of the contract for political reasons (see moratorium risk) or the loss of goods before transfer of risk from the confiscation or destruction among the political risks of an export and can be insured. The general policy warranty case occurs when legislative or regulatory actions abroad prevent the fulfillment of contractually owed by the exporter supplies and services in whole or in part and in the exporter claims therefore are not entitled. The only prerequisite is that the shipping has already begun.
Non-insurable risks
Will not be covered in addition to the punitive tariffs a variety of other risks. Force majeure ( "force majeure" ) are in the national and international trade unforeseeable, unavoidable events that are beyond the control of all on a trading business operators and could not be avoided under the circumstances, with appropriate, reasonable means (eg fire, floods, earthquakes, blockades, wars, civil wars, riots, revolutions, strikes, embargoes, seizure of ships, piracy, etc.). Through the " Force Majeure " clause must be emphasized in affected trade agreements that in cases of force majeure claims arising from obligations omitted. With regard to the scope of insurance, not all sub-cases of force majeure will be included in cover, so the individual contractual liability of this sub-cases is the " Force Majeure " clause is crucial. Also not covered is damage caused by nuclear or environmental impact in accordance to the Environmental Liability Act or the Water Act with.
An inclusion of particular economic risks is possible only in exceptional cases and subject to a separate individual decision of export credit insurance. The cover economic risk can in particular be considered if due to the project structure or the conditions in the country of investment a clear distinction between political and economic risks does not seem possible (eg former centrally planned economies ).
Effects of state export credit insurance
If particular political and transfer risks are insured stop, exports can take place that would not be made without export credit insurance in countries with high political and / or stop transfer risks. In this respect, export credit insurance is always secured state export promotion policy. Thus, the exporter is hedged because it can hedge the typical risks associated with exports, and the importer receives in a state with high political and / or stop transfer risks, the opportunity to ever make certain imports.
Are banks turned into such transactions in the financial credit risks, these are also favored (such as delivery tied credit to the exporter for pre-financing the production phase until receipt of payment or delivery -linked loans to the importer to finance the purchase price ) of export credit insurance. Loans are affected directly or indirectly by the poor country rating of the importer country when about Euler Hermes has taken over the export credit insurance in favor of a weak rating importer state. Euler Hermes acts as the mandatary on behalf and for the account of the Federal Republic of Germany, which has to take into account the results from the export credit insurance contingent liability in the federal budget. For then, credit institutions of the possibility of so-called guarantor substitution exercise by declaring the (better -rated ) Federal Republic of Germany to the final liability carrier, because it must pay in the event of liability.
Reference to the Federal Budget
If Euler Hermes as mandatary for the Federal Republic, the result is because of state compulsory cover a direct relationship with the federal budget. Under Article 115 of the Basic Law, the provision of guarantees, warranties or other guarantees, which can lead to spending in future fiscal years, the authorization required by federal law. The Export Credit Guarantees of the Federal Republic of Germany are fully integrated into the federal budget and are not included in the financial statements of Euler Hermes credit insurance. Revenue such as fees, charges and recoveries are paid to the federal budget. For this, all services and expenses such as compensation and administrative costs will be covered. From 2010 showed a surplus of EUR 605.6 million for the Federal budget. The German export credit insurance is no longer in deficit since 2006.
Under the so -called authorization procedure, the entire coverage of the state export credit insurance in the federal budget is set annually. Up to a certain sum of Euler Hermes should conduct the Indeckungnahmen autonomous, in addition, a " Interministerial Committee for export guarantees and export guarantees ( IMA) " to decide. Here, for the individual states liability limits ( ceilings ) are determined, up to the amount of the Euler Hermes is allowed to make government-guaranteed transactions.
The terms of export guarantees and sureties ( Hermes guarantees) do not correspond to the terms of general civil law, but can be distinguished with regard to the status of the importer. If the foreign debtor operated under private law firms, as export guarantees are used. If it is, however, at the importer to the government, a government agency or other public body, is the talk of export guarantees.
Liability case
Adopts the federal government due to the AWG an ordinance be revoked by an export license, not renewed or fails, the liability case occurs. Conversely, there is a liability case when the subdued economic and / or political collection risk realized abroad. In 2005, 63% of the compensation attributable to economic damages. The liability case, any risks covered, so the economic and political risk. Since January 2002, no guarantees for economic and political risks from export transactions with a maturity of up to 2 years are included in the core countries of the OECD (these are marketable risks that can be covered by private insurance ). Since May 2012, exports are no longer guaranteed to Greece.
Well-known international export credit insurer
In Switzerland, the Swiss Export Risk Insurance ( SERV) is organized as a state institution, in Austria, the Austrian Control Bank AG acts as an export credit insurer. In the U.S., export insurance by the Foreign Credit Insurance Assosciation ( FCIA ) and the Export-Import Bank of the United States ( EXIMBANK ), taken over by Compagnie Francaise d' Assecurance pour le Commerce Extérieur (COFACE SA Public Procedures) in France. In the UK, no independent institution accepts the export insurance business, but the government agency Export Credits Guarantee Department ( ECGD ).