export credit insurance.ppt
DESCRIPTION
international mrkt.TRANSCRIPT
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CHAPTER XXXII CHAPTER XXXII EXPORT CREDIT INSURANCEEXPORT CREDIT INSURANCE
Functions of Export Credit Insurance
Risks Covered Risks Not Covered Export Credit Insurance
Programs
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Export Credit InsuranceExport Credit Insurance
Purpose:To protect exporters against the risk of
nonpayment by foreign debtors due to commercial or political reasons
When:When exports being conducted without an
irrevocable, confirmed Letter of Credit– Exports on Open Account or D/A or D/P
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Functions of Export Credit Functions of Export Credit InsuranceInsurance
1) Reduces export risk of not being paid
2) Enhances an exporter's ability to obtain favorable export financing
3) Enables an exporter to offer competitive credit terms to an importer
4) Enables an exporter to penetrate high-risk foreign markets
5) Provides greater liquidity and flexibility of foreign accounts receivable
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Risks CoveredRisks Covered
1) Commercial Risks Inability or unwillingness of a foreign buyer
to pay due to commercial reasonsa. Economic deterioration in the buyer's market
b. Fluctuations in demand
c. Unanticipated competition
d. Technological changes
e. Key executives becoming inactive
f. Natural disasters: floods, fires and earthquakes
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Risks CoveredRisks Covered
2) Political Risksa. Warb. Revolution and insurrectionc. Boycottsd. Expropriation of buyer's businesse. Revocation of import or export licenses
after shippingf. Foreign exchange control: Currency
inconvertibilityg. Shifts in tariffs
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Risks Not CoveredRisks Not Covered
1) Shipments not complying with requirements of coverage
2) Shipments not reported to the insurer
3) Shipments which buyer refuses to accept
4) Disputed shipments until they become a legal obligation of the buyer
5) Losses due to the fault of exporter, agent or administrator
6) Claims not filed timely with the insurer
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Export Credit Insurance Export Credit Insurance ProgramsPrograms
Export-Import Bank of the United States (Ex-Export-Import Bank of the United States (Ex-Im Bank)Im Bank)
FCIA Management Company, Inc. (FCIA) FCIA Management Company, Inc. (FCIA) American International Group (AIG)American International Group (AIG)Euler American Credit Indemnity (AIC) Euler American Credit Indemnity (AIC) CNA Export Credit CNA Export Credit Lloyd’s LondonLloyd’s LondonChubb CorporationChubb Corporation
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Export-Import Bank of the Export-Import Bank of the United States (Ex-Im Bank)United States (Ex-Im Bank)
Short-Term Multi-Buyer Export Credit Short-Term Multi-Buyer Export Credit Insurance PolicyInsurance Policy
Short-Term Single-Buyer Export Short-Term Single-Buyer Export Credit Insurance PolicyCredit Insurance Policy
Medium-Term Single-Buyer Export Medium-Term Single-Buyer Export Credit Insurance PolicyCredit Insurance Policy
Small Business Multi-Buyer Export Small Business Multi-Buyer Export Credit Insurance PolicyCredit Insurance Policy
Leasing Export Credit Insurance Leasing Export Credit Insurance PolicyPolicy
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Short-Term Multi-Buyer Export Short-Term Multi-Buyer Export Credit Insurance PolicyCredit Insurance Policy
Policy Description: One-year blanket policy insuring short-term
export credit sales to many different buyers Repayment terms up to 180 days, 360 days
for agricultural commodities, fertilizer and consumer durables by special endorsement
Products of minimum 51% U.S. content excluding markup and non-military goods
Exporter must pay refundable minimum advance premium of $500 annually
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Short-Term Multi-Buyer Export Short-Term Multi-Buyer Export Credit Insurance PolicyCredit Insurance Policy
Coverage Options: Split coverage:• 100% for political loss and 90% for commercial
loss, 98% for agricultural sales • Exporter absorbs a first loss deductible in
addition to retaining10% of commercial risks Equalized coverage: • 95% for political and commercial loss. 98% for
agricultural sales• Exporter absorbs a first loss deductible in
addition to retaining 5% of both the political and commercial risk.
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Short-Term Multi-Buyer Export Credit Insurance Policy
Credit Limits:I. Discretionary Credit Limit (DCL)
Highest amount of insured credit outstanding to one foreign buyer without prior approval from Ex-Im Bank1) Credit information DCL: Two credit reports &
Conditions of Country Limitation Schedule2) Ledger Experience DCL: Past business
experience & Conditions of Country Limitation Schedule
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Short-Term Multi-Buyer Export Short-Term Multi-Buyer Export Credit Insurance PolicyCredit Insurance Policy
Credit Limits:
II. Special Buyer Credit Limit (SBCL)
Credit limit outstanding to any one foreign buyer at any one time
Must apply for SBCL if DCL too low
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Short-Term Multi-Buyer Export Credit Insurance Policy
Reporting Requirements:
Report of Premiums Payable listing all eligible shipments with premium check monthly
Overdue Report Form: 90 days overdue on $100,000 or more
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Short-Term Multi-Buyer Export Credit Insurance Policy
Claims:
To be filed between 90 days after due date and 240 days with Notice of Claim and Proof of Loss
Ex-Im Bank will pay valid claim in 60 days of receiving complete claim documents
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Short-Term Multi-Buyer Export Credit Insurance Policy
Characteristics:Policy proceeds assignable with prior
approvalDeductible may be fixed for policy year &
vary with volumeSpecial coverage with special
endorsement and additional premiums• Preshipment Coverage
• Non-acceptance Coverage
• Consignment Stock Coverage
• Sales from Overseas Warehouse Coverage
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Short-Term Single-Buyer Export Credit Insurance Policy
Policy Description:Single or multiple shipments to a single
foreign buyerGoods of minimum 51% U.S. content and
non-military goodsRepayment terms: Up to 180 days & 360
days for agricultural commodities, fertilizer, consumer durables, capital equipment
Submit application on buyer with credit report & trade references
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Short-Term Single-Buyer Short-Term Single-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Amount of Coverage: Sovereign obligors 100% Public & Private sector obligors 90% Letter of Credit transactions 95% Bulk agriculture 98%
No first loss deductible
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Short-Term Single-Buyer Short-Term Single-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Claims and PaymentsMust file a Notice of Claim and Proof of
Loss Form between 90 days and 240 days from the due date
Ex-Im Bank will pay within 60 days of receiving complete claim documents
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Short-Term Single-Buyer Short-Term Single-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Characteristics Exporter is not required to insure all credit buyers Policy proceeds may be assigned with prior
approval Special coverage with special endorsement &
additional premiums• Preshipment Coverage• Non-acceptance Coverage• Consignment Stock Coverage• Sales from Overseas Warehouse Coverage
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Medium-Term Single-Buyer Medium-Term Single-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Policy Description: U.S. capital goods and related services One to five years. Occasionally longer
payment terms up to 7 years No-military goods Written on a case-by-case basis
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Medium-Term Single-Buyer Medium-Term Single-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Coverage: 15% cash down payment by a foreign
buyer before delivery of the goods Lesser of 85% of exporter’s contract value
or 100% of the U.S. content 100% of financed portion against
commercial and political risks Creditworthy foreign buyer in acceptable
country per Country Limitation Schedule
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Medium-Term Single-Buyer Medium-Term Single-Buyer Export Credit Insurance PolicyExport Credit Insurance PolicyPremium:
No published rates. Can obtain non-binding rate
Claims: Monthly report on default accounts within
60 days of default To be filed no later than 240 days from the
date of default A 180-day waiting period on commercial
default If foreign buyer bankrupt or insolvent, or
political default, can file immediately
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Small Business Multi-Buyer Small Business Multi-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Policy Purpose: Small businesses new to exporting or
only occasionally exporting Help small businesses increase
international sales by extending competitive credit terms while minimizing credit risks
Also financing tool by offering insured foreign receivables as collaterals
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Small Business Multi-Buyer Small Business Multi-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Policy Description: All shipments on credit terms to all eligible
countries Policy period: 1 year. Renewed annually 51% U.S. content excluding markup Repayment terms: Up to 180 days for most
goods 360 days for agricultural commodities,
fertilizer, consumer durables by special endorsement
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Small Business Multi-Buyer Small Business Multi-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Coverage: 95% for commercial risks 100% for political risks No first-loss deductible
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Small Business Multi-Buyer Small Business Multi-Buyer Export Credit Insurance Export Credit Insurance
PolicyPolicyEligible Exporters:
Must be a small business determined by U.S. SBA under North American Industry Classification System (NAICS)
Annual export credit sales volume averaging $5 million or less for past two fiscal years
Positive net worth and at least one year successful operating history
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Small Business Multi-Buyer Small Business Multi-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Premium Rates and Payments: Premiums paid according to a rate
schedule One-time refundable advance premium
$500, but no minimum premium Submit a monthly Report of Premiums
Payable with premium payment
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Small Business Multi-Buyer Small Business Multi-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Credit Limits: Credit limits without prior approval from
EX-Im Bank is stated in the policy Granted in accordance with exporter’s
experience Exporter must obtain credit information on
buyer to show its creditworthiness Need EX-Im Bank’s pre-approval for
amounts over the credit limits in the policy
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Small Business Multi-Buyer Small Business Multi-Buyer Export Credit Insurance PolicyExport Credit Insurance Policy
Overdue Invoices and Filing Claims: Monthly report on past due accounts over
90 days and over $100,000 Claims to be filed between 90 and 240 days Exim Bank pays valid claims within 60
days of receiving complete documentation
Policy Assignment: Can assign policy proceeds to lenders
with approval of Ex-Im Bank
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Leasing Export Credit Leasing Export Credit Insurance PolicyInsurance Policy
Policy Description: Two types of credit insurance policy for U.S.
leasing industry
•Operating Lease Policy
• Financing Lease Policy
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Leasing Export Credit Leasing Export Credit Insurance PolicyInsurance Policy
Eligible Lessors: Leasing company, manufacturer, bank, or
other entity, foreign or domestic Leases or participates in the financing of
leases of U.S.-manufactured equipment and services outside the U.S.
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Leasing Export Credit Insurance Policy
Operating Lease Policy Divided into two part which may be
purchased together or separatelyI. Coverage for Streams of Payments
Provides coverage for the stream of payments falling due during a repossession-efforts period after default of the lease.
The length is usually for up to five (5) months after default
100% for sovereign leases and 90% for non-sovereign leases
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Leasing Export Credit Leasing Export Credit Insurance PolicyInsurance Policy
Operating Lease Policy
II. Coverage Against Governmental Prevention of Repossession (GPR) Insures the political risk of prevention of
repossession of the leased products due to specific actions, i.e., expropriation, confiscation, and cancellation of export license.
100% for all lease types
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Leasing Export Credit Leasing Export Credit Insurance PolicyInsurance Policy
Financing Lease Policy Covers a lease in which there is little
residual value and ownership is transferred to the lessee at the end of the lease
15% advance payment by the lessee to the lessor
100% coverage Assignment of proceeds to a financial
institution with a prior approval of the Ex-Im Bank
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Leasing Export Credit Leasing Export Credit Insurance PolicyInsurance Policy
Policy Issuance: Both policies cover single transactions.
Claims:
Operating Lease Policy: Not earlier than the end of repossession-efforts period and not later than 120 days after this period.
Financing Lease Policy: Between 90 and 240 days after default
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Leasing Export Credit Leasing Export Credit Insurance PolicyInsurance Policy
Assignment of Proceeds: May be assigned to financial institution,
subject to Ex-Im Bank approval
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FCIA Management CompanyFCIA Management Company
Foreign Credit Insurance Association (FCIA) was formed in 1961 as an Association of 50 leading insurance companies in cooperation with Ex-Im Bank of the U.S.
To promote U.S. exports through a credit insurance safety net
In 1992, the Association became solely a
private entity as FCIA Management, Inc.
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FCIA Management CompanyFCIA Management CompanyAll underwriting and processing services to
customers are now provided by FCIA Management Co., Inc., (www.fcia.com) which is a majority-owned subsidiary of Great American Insurance Co., Inc. of Cincinnati, Ohio.
FCIA makes its products available exclusively through brokers and independent agents International Associates in Downy, California Export Insurance Services, Inc. in Augusta,
Georgia
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American International GroupAmerican International Group
Available to large exporters with sophisticated credit management system
Policy limits up to $50 millionBuyer limits up to $20 millionAggregate deductible $50,000 at a minimumCoverage up to 100%Single up-front premium payment of $30,000Covers insolvency, protracted default, and
political risks
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Euler American Credit Euler American Credit Indemnity (ACI)Indemnity (ACI)
Founded in 1893 Insurance on both export and
domestic accounts receivables, covering credit sales to 160 countries worldwide
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CNA Export CreditCNA Export Credit
Trade credit insurance by CNA Insurance Companies
Covers insolvency and protracted default
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Lloyd’s of LondonLloyd’s of LondonBritish Insurance Exchange housing various
syndicatesUnderwrite Commercial and Political Risks
Insurance
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Chubb CorporationChubb Corporation
Corporation was formed in 1968Covers
Political Risks• Confiscation, Expropriation, Nationalization• Wrongful calling of Guarantee• Contract Frustration
Trade Credit Insurance• Multi-Debtor Policy• Key-Debtor Policy