presentation of ecgc, kolkata

EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED

You focus on exports. We cover the You focus on exports. We cover the risks. You focus on exports. We cover the You focus on exports. We cover the risks.


WELCOME TO A PRESENTATION ON

INSURANCE & RISK MANAGEMENTand

ROLE OF ECGC




ECGC Mission

To support the Indian export industry by providing cost effective insurance and trade related services to meet the needs of the Indian exporters




OBJECTIVE of ECGCOBJECTIVE of ECGC To PROMOTE EXPORTS Mainly by

• Protecting Exporters against COMMERCIAL & POLITICAL RISKS In

realising export proceeds

• Protecting Banks against RISK OF DEFAULT in export credit

• Protecting Investors against POLITICAL RISKS in Shareholders’ equity and loan In overseas investments




ECGC Fact sheet• Established in 1957

• Fully owned by GOI

• Under administrative control of MOCI

• Capital Base

• Highest ICRA rating of IAAA

• 5 Regional Offices and 51 Branch Offices

• All Branches ISO 9001:2000 certified

• Member of Berne Union

• MOU with GOI




Key Performance Highlights

Sr. No. Description

Financial Years ( Audited Data)

2010-11 2011-12

1 Gross Premium income Rs.885.47 cr. 1004.80 cr.

2 Claims Paid Rs.620.53 cr. 712.96 cr.

3 Recoveries Received Rs.136.07 cr. 168.69 cr.




What is Risk?What is Risk?

Uncertainty about future outcome due to :

Unexpected occurrence of events

– Uncontrollable factors

– Lack of Information




Risk PerceptionsRisk Perceptions

• Industry risk• Business risk• Risk of contract frustration• Risk of physical damage• Credit risk• Country Risk




What is Credit Risk

• Definition: The potential that a debtor will fail to meet its payment obligations in accordance with agreed terms.

• Export credit risk: a) Buyer related problems

b) Country related




Risk ManagementRisk Management

Analysis, acceptance or mitigation

• Risk avoidance

• Risk Transfer

• Risk Sharing

• Risk retention




PAYMENT RISK

RISK MANAGEMENT IN EXPORTSRISK MANAGEMENT IN EXPORTS

Goods Receivables

Exchange Risk

Loss or Damage

Marine Insurance

Hedging by Authorized

Dealers

CREDITCREDIT

INSURANCEINSURANCE




LC

Payment Risks

POLITICAL RISK

COUNTRY BUYER BANK

LC / NON – LC

COMMERCIAL RISK

Payment RisksPayment Risks




Role of ECGC as an Export Credit Insurer

• Providing Providing export credit insurance coversexport credit insurance covers to to ExportersExporters against loss in export of goods & services under against loss in export of goods & services under ST & MLT (ST & MLT (POLICY Scheme)POLICY Scheme)

• Providing Providing export creditexport credit insurance coversinsurance covers to to Banks & FI’sBanks & FI’s to enable exporters obtain better facilities from to enable exporters obtain better facilities from them them (ECIB) (ECIB) (formerly known as Guarantees)(formerly known as Guarantees)




War, Civil war,

Internal disturbance

s exchange

transfer blockages/delayNew import

restrictions, cancellation of import licence,

etc.

Risks covered -Political

Diversion of voyage due to war




Insolvency of

buyer/bankNon

acceptance of exported shipment

Default of buyer/bank

Risks covered- Commercial




Risks NOT considered Credit riskRisks NOT considered Credit risk• Non fulfillment of contractual obligations by exporter

including quality dispute.

• Default or insolvency or any omission /commission of any agent of exporter/ buyer

• Failure of buyer to obtain necessary approvals for imports

• Causes inherent in nature of goods

• Exchange fluctuation risks

• Physical loss/damage to goods




Principles of Credit InsurancePrinciples of Credit Insurance

• Good Faith

• Co-insurance

• Spread of risks




Buyer & Country Underwriting

• The 2 pillars of Export Credit Insurance :

and

Buyer Buyer UnderwritingUnderwriting

that assesses that assesses buyer risksbuyer risks

Limit fixed on BuyerLimit fixed on Buyer

Country Country UnderwritingUnderwriting that assesses that assesses country riskscountry risks

Country classification Country classification




Products offered to Exporters Declaration Based Policies

Whole Turnover

1) Standard (SCR) Policy2) Small Exporters Policy3) Export Turnover Policy

Specific transaction

1) Specific Shipment Policy2) Specific Buyer Policy3) Transfer Guarantee (for Banks)




Products offered to Exporters Exposure Based Policies

1) Single Buyer Exposure Policy

2) Multi buyer Exposure Policy

3) SME Policy




Products offered to Exporters Consignment Based Policies

1) Consignment Export Policy

2) Global Entity Policy




Products offered to Exporters Covers for IT/ITES industry

1) Software project exports policy

2) IT enabled (single customer) policy

3) IT enabled (multi customer) policy




Premium Structure BasisPremium Structure Basis

• Country Grouping - 7 fold (237 countries) ( A1, A2, B1, B2,….. D)- Higher the country

group, lower the premum rates

• Terms of Payment- More superior the payment terms, lower the premium rate

• Specific approval required for Restricted Cover countries




Shipments (Comprehensive Risks) Policy

• Whole Turnover principle• Selective options for exclusion-

LC/ Associates/ Consignments• 90% cover • Minimum premium of Rs.10,000/-• Policy Period - 2 years• Buyer wise Credit limit • Discretionary limit• Monthly declarations with premium • No Claim Bonus – yearly 5%; max 50%




Small Exporters Policy

• Turnover not exceeding Rs.50 Lakhs p.a.• Minimum Premium Rs.2000/-• Policy Period - one year• Higher percentage of cover-

Commercial risks 95%; Political risks 100%

• No Claim bonus • Quarterly Declarations




Specific Shipment Policy (SSP)

• Covering one shipment or One contract • Processing fee of Rs.1000/- • 80% cover• Premium higher than standard premium rates• Upfront premium before issue of Policy• Commercial / Political risks and L/C

comprehensive risks covered• Submission of Shipment Statement and

realisation report




SME POLICY• For exporters with Export Turnover not

exceeding Rs10 Lakhs and registered under MSME Act, 2006

• Cover available upto Rs10 lakhs.• Annual premium Rs 5,000 and processing fee

of Rs1,000• 90% cover • Maximum claim payable is Rs3 lakhs on any

buyer • No requirement of monthly declaration of

shipments




Benefits For Exporters

• Protection for account receivable

• Reduction in Bad debt

• Improvement in quality of financial planning

• Enhancement in risk taking capacity

• Easy access to bank finance on liberal terms




ECIB’S TO BANKS• Contract of insurance between bank & ECGC

• Protects banks against losses in export credit due to

- Insolvency of exporter - Protracted default of exporter




Benefits For Banks

• Protection For Pecuniary Liabilities Against Funded and Non Funded Credit Facilities To Exporters

• Enables To Waive Collateral Securities

• Lesser Capital Deployment requirement.




In the Service of Exporters and Banks since 1957

Thank YouThank You Please visit us at: www.ecgc.in

: [email protected];[email protected]

http://www.ecgc.in/

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