credit insurance aaaaa
TRANSCRIPT
-
7/30/2019 Credit Insurance Aaaaa
1/21
Export Credit Insurancefor
Managing risk,Improve Financing
Facilitating Trade
Kathy Edwards
Global Business Solutions Corp.
-
7/30/2019 Credit Insurance Aaaaa
2/21
What is Credit Insurance?Insurance against non-payment ofaccounts receivable
Protection of a major asset on yourbalance sheet
Collateral
Sleep Insurance
-
7/30/2019 Credit Insurance Aaaaa
3/21
What it is NotA means to make a bad credit good
Primary source of repayment
-
7/30/2019 Credit Insurance Aaaaa
4/21
Advantages of Credit Insurance
Protection Against Bad Debt Loss
Increased Sales
Better Borrowing Position with Insured Receivables
Credit Information Resource
Collection Services
Factoring
-
7/30/2019 Credit Insurance Aaaaa
5/21
Types of CoverageCommercial Risks
Buyer goes bankrupt
Death
Default of payment for any reason other than productdispute
Political Risk Transfer riskGovernment preventing release of funds
war/revolution
currency inconvertibility
loss of import/export license (Contract Frustration)
-
7/30/2019 Credit Insurance Aaaaa
6/21
Catagories of InsurersPublic Underwriters
Private Underwriters
-
7/30/2019 Credit Insurance Aaaaa
7/21
Public UnderwritersExport-Import Bank of the United States
Defined programs and costs
Subject to US Government policiesSmall business policies
Short term, medium term, long term
Single buyer or multi-buyer
Pay as you go to improve cash flow
Export Credit Agencies (ECAs)OECD guidelines
Insurance builds customer loyalty
-
7/30/2019 Credit Insurance Aaaaa
8/21
Underwriting PhilosophiesExporter
Length of time in business
Financial informationCredit approval experience
Losses
Underwriting BuyersTrade References
Credit reports D&B International
Coface
Graydon
Financial information
-
7/30/2019 Credit Insurance Aaaaa
9/21
Private Insurance Market
Export & Domestic CoverageAIG
Coface (f/k/a CNA)Euler Hermes ACI (f/k/a Euler ACI)
Altradius Trade Credit Insurance (f/k/a
Gerling NCM Credit Insurance)FCIA
-
7/30/2019 Credit Insurance Aaaaa
10/21
Private UnderwritersLess stringent underwriting of exporter
Greater exporter responsibility for creditevaluation of buyer
Deficient exporter credit files may resultin refusal of claim payment
Minimum premium payable up frontLower rates but greater possibility ofpurchasing unnecessary coverage
-
7/30/2019 Credit Insurance Aaaaa
11/21
$27,000$29,400$30,000$33,000Estimated
Premium onsales of $6 Mil
.45%.49%.50%.55%Premium Rate
$100,000$0$150,000$20,000DiscretionaryCredit Limit -DCL
$40,000$0$50,000$0Annual
Deductible
95%90%90%90%Indemnity
$1.5 mil$3 mil$2 mil$1 milPolicy Limit
Quotes from Private Insurers
-
7/30/2019 Credit Insurance Aaaaa
12/21
Policy AssignmentBenefits of policy can be assigned to abank or lending institution
Immediate availability of funds
Pass cost of funds to importer
Claims will be paid directly to thelender
-
7/30/2019 Credit Insurance Aaaaa
13/21
Credit Insurance as a Sales AidOpen account sales
Better credit terms
Develop new markets
Less Creative sales terms from sales
staff
-
7/30/2019 Credit Insurance Aaaaa
14/21
Replace Letters of CreditLetters of Credit
L/Cs do NOT guarantee payment
L/Cs require expertise
L/C may cost the sale if a competitor offers open accountterms
L/Cs tie up buyers funds or credit facilities
Insurance eliminates high local interest costs
Insurance eliminate bank fees, amendment fees, and
discrepancy fees
-
7/30/2019 Credit Insurance Aaaaa
15/21
Final WordEvery asset on a balance sheet is insured
except accounts receivablewhich, in some cases, account for
50% of the assets of the business
Would that keep you awake at night?
-
7/30/2019 Credit Insurance Aaaaa
16/21
Dollars and Sense
-
7/30/2019 Credit Insurance Aaaaa
17/21
Sale to MexicoSale EXW $100,000
SHIPPING $5000.00
DAF(LARADO) $105,000
TERMS:SHIP 60 DAYS FROM REC OF IRR COMFLETTER OF CREDIT.
-
7/30/2019 Credit Insurance Aaaaa
18/21
BUYERS VIEWLOC $105,000
BANK FEE 5% $5,250
SUBTOTAL $110,250
COST OF $$ * $3,325LANDED COST $113,575
*I=prt. $105x19%/12x2=
-
7/30/2019 Credit Insurance Aaaaa
19/21
60 DAY OPEN ACCT WITH
INSURANCEEXWORKS $100,000
SHIPPING $5,000
DAF $105,000
CREDIT
INSURANCE* $1,000
FINANCE % $1,000LANDED COST $107,000
*premium at 1% for 60 days
-
7/30/2019 Credit Insurance Aaaaa
20/21
LOC PRICE $113,575
60 DAY OPEN
ACCOUNT $107,000
DIFFERENCEIN DELIVERED
PRICE $6,575
-
7/30/2019 Credit Insurance Aaaaa
21/21
IS YOU STUFF WORTH
$6575 MORE THAN YOUR
COMPETATORS