Export credit indemnity ( ECI ) protects an exporter of products and services against the gamble of non-payment by a alien buyer. In other words, ECI importantly reduces the payment risks associated with doing occupation internationally by giving the exporter conditional assurance that payment will be made if the foreign buyer is ineffective to pay. Simply put, exporters can protect their foreign receivables against a variety of risks that could result in non-payment by extraneous buyers .
ECI broadly covers commercial risks ( such as insolvency of the buyer, bankruptcy, or protracted defaults/slow requital ) and certain political risks ( such as war, terrorism, riots, and revolution ) that could result in non-payment. ECI besides covers currentness inconvertibility, expropriation, and changes in consequence or export regulations. ECI is offered either on a single-buyer footing or on a portfolio multi-buyer footing for short-run ( up to one year ) and medium-term ( one to five years ) refund periods.

Key Points 

  • ECI allows exporters to offer competitive open report terms to extraneous buyers while minimizing the hazard of non-payment .
  • even creditworthy buyers could default on payment due to circumstances beyond their operate.

  • With reduced non-payment risk, exporters can increase export sales, establish market share in emerging and developing countries, and compete more vigorously in the global grocery store .
  • When foreign accounts receivable are insured, lenders are more uncoerced to increase the exporter ’ south adopt capacity and offer more attractive finance terms .
  • ECI does not cover physical loss or price to the goods shipped to the buyer, or any of the risks for which coverage is available through marine, open fire, casualty or other forms of indemnity .

Characteristics of Export Credit Insurance

Applicability 
Recommended for manipulation in junction with open account terms and pre-export working capital finance.

Risk 
Exporters assume the risk of the uncover helping of the loss and their claims may be denied in case of non-compliance with requirements specified in the policy .
Pros 
Reduces the gamble of non-payment by foreign buyers offers open report terms safely in the global market.

Cons 
Cost of obtaining and maintaining an insurance policy. risk sharing in the form of a deductible ( coverage is normally below 100 percentage ) .
Coverage 
short-run ECI, which provides 90 to 95 percentage coverage against commercial and political risks that result in buyer payment defaults, typically covers ( a ) consumer goods, materials, and services up to 180 days, and ( b ) humble capital goods, consumer durables, and majority commodities up to 360 days. Medium-term ECI, which provides 85 percentage coverage of the internet contract value, normally covers big capital equipment up to five years. ECI, the cost of which is much incorporated into the sell price by exporters, should be a proactive purchase, in that exporters should obtain coverage before a customer becomes a problem.
Where Can I Get Export Credit Insurance? 

ECI policies are offered by many secret commercial gamble insurance companies a well as the Export-Import Bank of the United States ( EXIM ), the government agency that assists in financing the export of U.S. goods and services to external markets. U.S. exporters are strongly encouraged to shop for a specialization insurance broke who can help them select the most cost-efficient solution for their needs. reputable, well-established companies that sell commercial ECI policies can be well found on the Internet. You may besides buy ECI policies directly from EXIM. In summation, a list of active policy brokers registered with EXIM is available at www.exim.gov or you can call 1-800-565-EXIM ( 3946 ) for more information.

Private-Sector Export Credit Insurance  

  • Premiums are individually determined based on risk factors and may be reduced for established and experienced exporters.

  • Most multi-buyer policies price less than 1 percentage of see sales, whereas the prices of single-buyer policies vary widely due to presumed higher risk .
  • There are no restrictions regarding alien contentedness or military sales .
  • commercial insurance companies can normally offer flexible and discretionary citation limits .

EXIM Bank’s Export Credit Insurance 

  • EXIM customers are advised to refer to the Exposure Fee Information & Fee Calculators part ( which are posted on the Bank ’ s Web site www.exim.gov under the “ Apply ” incision ) to determine exposure fees ( premiums ) .
  • coverage is available in riskier emerging extraneous markets where individual insurers may not operate .
  • Exporters electing an EXIM working capital guarantee may receive a 25 percentage agio deduction on multi-buyer policy policies .
  • enhance support is offered for environmentally beneficial exports .
  • The products must be shipped from the United States and have at least 50 percentage U.S. message.

  • EXIM is unable to support military products or purchases made by extraneous military entities .
  • support for exports may be closed or restricted in certain countries for U.S. government policy reasons ( for more information, see the Country Limitation Schedule posted on the Bank ’ s Web site under the “ Apply ” section ) .

This article is from chapter 9 of the U.S. government ’ s Trade Finance Guide. For more on recognition indemnity, visit the EXIM web site .

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