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1
CONTA
CTS
Berne Union 2015
Contacts
International Union of Credit &Investment InsurersIncluding Berne Union Prague Club1st Floor 27-29 Cursitor StreetLondon EC4A 1LTUnited Kingdom
Tel: +44 (0)20 7841 1110Fax: +44 (0)20 7430 0375
www.berneunion.org
TXFEditor-in-chiefJonathan Bell
News and features editor Oliver Gordon
Production editorJohn Smith
Managing directorDan Sheriff
Commercial directorDominik Kloiber
Product development directorMax Carter
Chief technology officerJames Petras
Head of communicationsKaty Rose
Business development executive Abby Smith
Data analystAna Jovanovic
Published byTXF: Trade & Export FinanceCanterbury CourtKennington Park1-3 Brixton RoadLondon SW9 6DEUnited Kingdom
Tel: +44 (0) 20 3735 5180Email: [email protected]
www.txfnews.comwww.tagmydeals.com
2
Berne Union 2015
Contents1 Introduction
Berne Union committees and personnel 6
Foreword 8Berne Union president Dan Riordan
2 Data and Statistics
Berne Union totals 14Short-term export credit insuranceMedium- and long-term export credit insuranceInvestment insurance
Analysing Berne Union data trends 20 Kai Preugschat, secretary-general, Berne Union, & Laszlo Varnai, assistant director,Berne Union
3 Expert Analysis
OVERVIEWThe stabilising role of ECAs 28Edna Schöne, board member, Euler Hermes Aktiengesellschaft AG
Cooperation in export finance 30Michal Ron, managing director, head of international business, SACE
The era of trade regulation 35Ralph Lerch, chair of the EBF’s export credit working group, and global head ofexport finance at Commerzbank
Borrowers and ECA financing 42Helen Castell, senior reporter, TXF Media
The future role and scale of ECAs 46Laszlo Varnai, assistant director, Berne Union
SME FOCUSSMEs and Denmark’s EKF 50Maria Steffensen, senior communications consultant, EKF
SMEs and the Berne Union 52Abbey Sturrock, director, Berne Union
Supporting SME transactions 55Matthias Wietbrock, managing director, Northstar Europe
REGIONAL FOCUSECA innovations – the Finnvera example 58Topi Vesteri, deputy CEO, group chief credit officer, Finnvera, & Satu Savelainen,senior advisor, Finnvera
Sinosure’s rapid growth 61Wang Yi, chairman, Sinosure
Renminbi support 64Paul Walsh, aerospace underwriting manager, UK Export Finance, & HannahSteadman, aerospace underwriter, UK Export Finance
Asian trade flows 66Geetha Muralidhar, chairman and managing director, ECGC
MENA perspective 69Karim Nasrallah, general manager, Lebanese Credit Insurer
ECAs and African banks 72Rebecka Lundgren, country analyst, Africa, EKN, & Karl-Oskar Olming, Africarepresentative, EKN
3
CONTENTS
Berne Union 2015
3 Expert Analysis continued
Sub-Saharan Africa and the role of ECIC 74Kutoane Kutoane, chief executive officer, Export Credit Insurance Corporation ofSouth Africa (ECIC)
Angola – MIGA case study 78Noureddin Ennaboulssi, senior underwriter, Multilateral Investment Guarantee Agency (MIGA)
Electricity transmission - Zambia case study 80Karl-Oskar Olming, Africa representative, EKN
NAFTA and Bancomext 83Luis Humberto Villalpando Venegas, vice president of economic analysis, Bancomext
RISK MANAGEMENT & INSURANCECommodity volatility and political risk 88Katherine Zylinski, portfolio analyst, credit and political risk product underwriting,Zurich, North America
Political risk on the rise 92Valerio Ranciaro, director general, SACE
Local currency risk 96Chris Vermont, managing director, GuarantCo, Frontier Markets Fund Managers
Risk claims analysis 98Maxence Mormède, chief investment officer (CIO), advanced fixed income, AllianzGlobal Investors
Claims process for single transaction risk 101Olivier David, head of special products – trade credit and political risks, Atradius
Claims 2015 – the Hiscox perspective 104Victoria Padfield, political risk underwriter, Hiscox
Conflicts and global political risks 106Dr Antoinette Valsamakis, director, Global Risk Consulting, IHS Economics andCountry Risk
ECAs and short-term credit insurance 112Seung Dal Baek, senior director, short-term business department, K-sure
Academic research and export credit insurance 114Professor Andreas Klasen, Offenburg University
FINANCING & INVESTMENTDirect lending – UKEF 118Margaret Eyres, head of direct lending, UK Export Finance
Renewables finance 120Jan Vassard, deputy CEO, EKF, & Ole Lindhardt, chief communications consultant, EKF
Policy analysis of the Indian ECA 122Geetha Muralidhar, chairman and managing director, ECGC
BPO and short-term credit insurance 126Markus Wohlgeschaffen, global head of trade products, UniCredit, & AndreCasterman, global head of corporate and trade markets, SWIFT and chair of the BPO project
Trade finance as an asset class 128Helen Castell, senior reporter, TXF Media
4 Members Directory
Berne Union members 135
Prague Club members 161
Berne Union 2015
Berne Union 2015
1Introduction
Berne Union 2015
PRESIDENTDaniel RiordanChief Executive Officer of Zurich GlobalCorporate in North America
Dan Riordan joined Zurich North America in1997 to establish and manage the globalpolitical risk and trade credit business. Beforehis current post, Dan also led a combinedinternational surety, credit, and political riskgroup and served as president of Zurich’sspecialty products unit. Prior to joiningZurich, Dan was a senior executive managingOverseas Private Investment Corporation’s(OPIC) portfolio of long-term investments indeveloping countries. Dan has been active inthe Berne Union over the course of his career,serving as vice-chairman and chairman of theInvestment Insurance Committee and as vice-president in 2011.
VICE PRESIDENTMichal RonHead of International Relations and Network,SACE, Italy
With extensive experience in the world ofstructured project finance and export credit,Michal is currently heading SACE’sinternational relations and network. Herresponsibilities include international relations,overseas network and political creditrecovery. She manages all activities related tothe OECD, European commission and ParisClub with a track history of €9 billion ($10.1billion) in sovereign recoveries over the lastfour years. More recently, she has steered theexpansion of SACE’s international networkthrough SACE’s presence in nine overseaslocations (Hong Kong, Sao Paolo,Johannesburg, Nairobi, Moscow, Istanbul,Bucharest, Mumbai and Mexico City) and aMENA Office, currently scheduled to open in2015. Before SACE, she spent 10 years at MCCSpA (head of oil, gas and petrochemicals,structured finance) and seven years withHSBC (London, Madrid, Milan).
Short Term Committee
CHAIRThomas KringsRegional Director Risk, Member of the Boardof Management Euler Hermes AG, Germany
Thomas Krings was born 1968 in Hamburg.He studied at Business Academy Hamburg,and graduated in business administration. In1994 Thomas started working for EulerHermes Kreditversicherungs-AG as assistantto the board. After various positions, he hasnow worked for more than 10 years in theexport and project financing business line. Heheaded the export risk underwriting unit until2008, followed by commercial controllingand product development. Since 2010Thomas has been regional director of risk forthe DACH region and member of the boardof Euler Hermes AG since 2014.
VICE CHAIRJan VassardDeputy CEO, EKF, Denmark
Medium/Long Term Committee
CHAIRKarin ApelmanDirector General, EKN Sweden
Karin Apelman joined EKN, the SwedishGovernment’s ECA, in 2002, as a member ofthe board of directors, and later served assecond vice-chairman from 2006-2007. Shewas appointed director general in 2007. Karinis a member of the Swedish Radiation SafetyAuthority’s financing delegation (SSM) since2009, a member of the board of directors ofSwedavia since 2010, and a member of theAdvisory Council at The Legal, Financial andAdministrative Services Agency(Kammarkollegiet) since January 2011. Karinwas the chief financial officer at LFV SwedishAirports and Air Navigation Services from2001-2007.
VICE CHAIRJing Fenglei Chief Representative of LondonRepresentative office, Sinosure, China
6
Berne Union 2015
Berne Union 2015
Dan Riordan
Michal Ron
Thomas Krings
Jan Vassard
Karin Apelman
Investment InsuranceCommittee
CHAIRVinco DavidSenior Manager, Atradius Dutch StateBusiness, The Netherlands
Vinco David has a 29 year long internationalexperience in credit and investment insurance.He is currently a member of the managementteam of Atradius Dutch State Business NV, theexport credit agency of the Netherlands. Hisresponsibilities include international relations,reinsurance, product development, marketdevelopment, communication and corporateresponsibility. Previously Vinco held positionsat the Berne Union Secretariat and theNetherlands Ministry of Finance.
VICE CHAIRJim ThomasExecutive Vice President and ManagingDirector, Zurich Credit and Political Risk
Prague Club
CHAIRKarim NasrallahManaging Director, LCI, Lebanon
Karm Nasrallah is the founder and managingdirector of the Lebanese Credit Insurer (LCI).LCI is the first private independent creditinsurance company in Lebanon and theMiddle East. Through his different ventures,Karim has been involved for more than 20years in all aspects of credit management,ranging from credit insurance and factoringto credit information and debt collection, inthe Levant and the Middle East regions. SinceDecember 2013, Karim has been the chairmanof the Prague Club, part of the Berne Union.The Prague Club is an association of new andmaturing insurers of export credit andinvestment which supports its members indeveloping their activities.
Berne Union Secretariat
Kai PreugschatSecretary GeneralKai Preugschat joined the Berne Union as theorganisation’s Secretary General in August2014, based in London. Until then Kai wasUniCredit Group’s deputy global head ofexport finance. He also chaired the ICC’ssteering committee for its medium /long-term Trade Register.
Previously Kai co-headed the underwritingand risk management division of Germany’sofficial export credit agency, Euler Hermes.Before that, he managed the Export FinanceBank-project (EFB) in Singapore, sponsoredby ANZ Banking Group. From 2004 to 2008Kai was with KfW IPEX-Bank. Between 1986and 2004 he held various managerial rolesfor ANZ, Bayerische LB and Hypo-Bank.
Abbey SturrockDirectorAbbey Sturrock joined the Berne Union inFebruary 2013, as the assistant director.Before joining the Berne Union, from 2005Abbey worked for Export DevelopmentCanada (EDC) – Canada’s export creditagency. She initially worked within themining, infrastructure development andservices team as a political risk insuranceunderwriter for several years, and in 2012moved to EDC’s contract insurance andbonding team.
Laszlo Varnai, Assistant Director
Massimo Sarti, Data Manager
Ella Szukielowicz-Lindon Business Support Manager
Jihong Jeong, Secondee, K-sure
Pu Yu, Secondee, Sinosure
Yushin An, Secondee, K-sure
Irene López, Secondee, CESCE
7
INTRODUCTIO
NBerne Union 2015
Jim Thomas
Vinco David
Karim Nasrallah
Kai Preugschat
Abbey Sturrock
Jing Fenglei
Management Committee Members
ASHRA ATRADIUS COFACE COSEC
EH GERMANY EGAP MIGA NEXI
SINOSURE SLECIC US EXIM BANK ZURICH
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This report, as an annual review, presents theoccasion to reflect on the many surprises,challenges, opportunities, and achievementsthat have emerged over the course of the lastyear. As an association of over 80international members representing an evenmore diversified industry, that list is long andvaried. 2015 to date has been no exception,both for the Berne Union as an organisationand also for each member.
The global economy continues to fluctuatewith historical shifts in balance, difficulty insustaining economic growth, and increasingvolatility due to heightened interconnectivityof previously isolated risks. As experts intheir respective fields, our members continueto evolve to meet the needs of their ever-changing customers and stakeholders. TheBerne Union in parallel is also transitioning tobe the insightful resource for members,industry practitioners, governments, and thepublic alike.
At the time of writing, the Chinese yuanhas stabilised after the tumult of August 2015.Puerto Rico has presented to US Congress itsdebt restructuring plan, and US Exim Bankremains in a state of limbo. OPEC officialsexpect prices to remain below $60 per barrel
of Brent crude at least into the second quarter of 2016, and the USA’s US EnergyInformationAdministration (EIA)expects the gap in oiloutput andconsumption to growin the near term. The
spotlight on credit, geopolitical andinvestment hazards for companies of all sizeshas never been brighter and the use ofinsurance is no longer a tool only to mitigaterisks, but rather also a vehicle to supportglobal expansion, to optimise financing ofstrategic initiatives, and to capturestakeholder value. When considered alsoalongside the dynamic between banks,export credit agencies, and the growinginsurance market capacity, the case is madefor continued strong competition fromtraditional players and new entrants in the sector.
For Berne Union members through thefirst half of 2015, this has translated into aconsistently growing demand, due to a
9
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Berne Union 2015: President’s foreword
A changing BerneUnion for a new andvolatile worldBerne Union president and CEO of Zurich Corporate North America, DanielRiordan, reviews the risks facing insurers in 2015 and highlights how theBerne Union is adapting to help its members
Dan Riordan
The use of insurance is no longer a tool only to mitigaterisks, but rather also a vehicle to support globalexpansion, to optimise financing of strategic initiatives,and to capture stakeholder value.
combination of greater risk awareness ofexporters and investors coupled with aslower closing rate in particular for capitalgoods and infrastructure contracts.
The medium to long-term export creditagencies (MLT) have recorded a markedlylower new business volume of $59.5 billion, adecrease of 20% when compared to the firsthalf of 2014. It is likely too early to drawconclusions about a general trend as far as
the MLT decrease year over year due to thetiming of reported deals typically beingrealised in the second half of the year. Incontrast, new cover provided amounting to$49.8 billion by Investment Insurers (INV)remained in line with levels observed duringthe first half of 2014.
Nevertheless this noticeable reductionshould be considered as a strong reminderthat the continued market volatilities mayindeed result into a slowdown for somesectors.
While short-term trade credit insurance(ST) does not report its actual turnoverexcept for the full year, overall country limitcommitments are now just under $1 trillion, areduction in excess of 13% when compared tothe first half of 2014. 2014 ST turnoverultimately rose when compared to 2013
despite an initial round of limit cuts.Competition from excess bank liquidity mayhave a stronger impact in 2015 than yearspast. While rationing of commitments hascontinued throughout a number of matureand saturated OECD markets, the largestsingle country limit reduction was observedfor Russia, a cut in excess of 50%.
As evidenced by the mixed businessresults describe above, it is largely too soonto tell just how this phase of post-globalfinancial crisis recovery will continue, thoughthe Berne Union and Prague Club continue tofind ways to serve its members and to usethe extensive knowledge of its membershipto the benefit of the industry. Many examplesof this have taken place throughout 2015, andsome are highlighted below.
What started several years ago as agoodwill conversation between Berne Unionofficials and the IFC, this year developed intoa capacity building effort with an emphasisinto financing for the African banking sector.This element is a final facet of a focusedcollaboration with the World Bank that hasalso touched on industry trends such asclimate finance and local currency financing,each work stream with noticeable progressseen in terms of new transactions andcooperation amongst ECAs, IFIs, andexporters.
In a topic not unrelated to underscoringthe benefits of ECA-backed loans for banks,the Berne Union continues its efforts inevaluating and understanding how to servethe SME sector that is so critical ineconomies, emerged and developing alike.The instability in global economies continuesto put a damper on economic growthexpectations; and, accessibility to credit andfinancing for SMEs is a recurrentconsequence in 2015. Potential solutionsavailable for small- or medium-sizedenterprises are being piloted and tested byBerne Union and Prague Club members andare as diverse as the local economies served,from technological applications to bespokepropositions and claims management tools.The constant across the public sector is the
10
Berne Union 2015: President’s foreword
What started several years ago as a goodwillconversation betweenBerne Union officials and the IFC, this yeardeveloped into a capacity building effortwith an emphasis intofinancing for the Africanbanking sector.
The medium to long-term export credit agencies (MLT)have recorded a markedly lower new business volumeof $59.5 billion, a decrease of 20% when compared tothe first half of 2014.
desire on all parties to reinvigorate thecontribution of these SMEs to pre-2009levels and beyond.
While innovations and trends will keepexport credits, capital financing and riskmitigation products relevant and applicable,there exists also a need to create a balancebetween the fundamentals of the businessand leveraging new opportunities andfrontiers. This year, the ongoing consultationbetween the Berne Union and the WTOresulted in two distinct instances of crossoverbetween their mission and the institutionalknowledge contained within the Berne Union.Specifically, this was noted in the benefitsand limitations of the banks’ ability toappreciate credit relief as an answer to BaselIII regulations.
The world is becoming moreinterconnected and, as a result, moreaccessible today than in the past. Each of usis being challenged to do more, to worksmarter, and to reach new heights. As such,over the last two years the Berne Union hasgone far into cultivating a culture ofaccountability, transparency, and a highcalibre of performance.
The leadership added a rigour to themedium to long-term strategic planning forthe association, ultimately to provide highlevel of service and value to its members, andto attract attention of prospective members.The Secretariat has gained clarity andrealised efficiency from the addition of annualperformance management and careerdevelopment tools, positioning the BerneUnion as an employer of choice for industrycolleagues.
In 2006 the Berne Union drafted andadopted a set of guiding principles thatwould reflect the values of the association,agreed to by 39 diverse member companies.Two years ago, we introduced a communityelement during the annual meetingprogramme of Berne Union and Prague Club.Members have contributed their time andenthusiasm over the span of four meetings tolearn about the communities visited during
meetings and to touch the mission oforganisations serving those locales.
Each subsequent effort brings new interestand engagement from delegates and it is myhope that this initiative will grow as a fibre ofthe Berne Union’s institutional values. Further,in 2013 the Berne Union and Prague Club alsogreatly increased their collaboration to breakdown siloes that previously madeconnections between members isolated andcumbersome. This has enriched exchangebetween the groups and continues tostrengthen the voice of the Berne Union as acollective representative for trade and exportfinance.
In parallel, strides continue towardsimproving and increasing communication onall facets. The focus remains on enablingcollaboration amongst members and theindustry at large. As this function solidifies, sowill the reliance upon the business datacollected and analysed by the Berne Union.There are vast insights to be drawn from thedata and it is to our collective advantage tobuild a world class capability, in complementof the anecdotal expertise of the members ofthe leading association for trade credit andinvestment insurers. ■
11
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Berne Union 2015: President’s foreword
The focus remains onenabling collaborationamongst members and theindustry at large. As thisfunction solidifies, so willthe reliance upon thebusiness data collectedand analysed by the Berne Union.
While innovations and trends will keep export credits,capital financing and risk mitigation products relevantand applicable, there exists also a need to create abalance between the fundamentals of the business andleveraging new opportunities and frontiers.
Berne Union 2015
Berne Union 2015
2Data and Statistics
14
Berne Union 2015
-
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
2,250,000
2010 2011 2012 2013 2014
US
D m
illio
n
2,250,000
2,250,000
1,500,000
1,750,000
2,000,000
1,500,000
1,750,000
2,000,000
750,000
1,000,000
1,250,000
1,500,000
noillm
iS
DU
750,000
1,000,000
1,250,000
1,500,000
250,000
500,000
750,000
250,000
500,000
750,000
- 2010
1201
2012
2013 2014
2014
New Business – during each year
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
2,250,000
2010 2011 2012 2013 2014U
SD
mill
ion
2,250,000
2,250,000
1,500,000
1,750,000
2,000,000
1,500,000
1,750,000
2,000,000
750,000
1,000,000
1,250,000
1,500,000
noillm
iS
DU
750,000
1,000,000
1,250,000
1,500,000
250,000
500,000
750,000
250,000
500,000
750,000
0
2010
1201
2012
2013 2014
2014
Exposure – at year end
0
1,000
2,000
3,000
4,000
5,000
6,000
2010 2011 2012 2013 2014
US
D m
illio
n
6,000
4,000
5,000
noill
mi
SD
U
2,000
3,000
4,000
noillm
iS
DU
1,000
2,000
02010
1201
2012
2013 2014
2014
Claims Paid – during each year
0
1,000
2,000
3,000
4,000
2010 2011 2012 2013 2014
US
D m
illio
n
4,000
3,000
noill
mi
SD
U 2,000
noillm
iS
DU
1,000
02010
1201
2012
2013 2014
2014
Recoveries – during each year
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2010 2011 2012 2013 2014
US
D m
illio
n
1,800,000
1,800,000
1,400,000
1,600,000
1,800,000
1,400,000
1,600,000
1,800,000
800,000
1,000,000
1,200,000
noillm
iS
DU
800,000
1,000,000
1,200,000
200,000
400,000
600,000
200,000
400,000
600,000
200,000
0
200,000
2010
1201
2012 2013
2013 2014
ST New Business – insured during each year
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2010 2011 2012 2013 2014
US
D m
illio
n
1,200,000
1,200,000
1,000,000
1,200,000
1,000,000
1,200,000
600,000
800,000
noillm
iS
DU
600,000
800,000
200,000
400,000
200,000
400,000
02010
1201
2012 2013
2013 2014
ST Credit limits – at year end
Berne Union: Short-Term Export Credit Insurance
Berne Union: Totals
Key■ INV – Investment Insurance■ MLT – Medium/Long Term Export Credit Insurance■ ST – Short Term Export Credit Insurance
15
DA
TA A
ND
STA
TIS
TIC
SBerne Union 2015
0
500
1,000
1,500
2,000
2,500
2010 2011 2012 2013 2014
US
D m
illio
n
2,500
2,500
2,000
2,000
2,500
1,000
1,500
noillm
iS
DU
1,000
1,500
1,000
500
1,000
02010
1201
2012 2013
2013 2014
ST Claims Paid – during each year
0
100
200
300
400
500
600
2010 2011 2012 2013 2014
US
D m
illio
n
600
500
noill
mi
SD
U 300
400
noillm
iS
DU
100
200
02010
1201
2012 2013
2013 2014
ST Recoveries – during each year
UNITED STATES
GERMANY
UNITED KINGDOM
FRANCE
ITALY
CHINA
NETHERLANDS SPAIN
BRAZIL
SWITZERLAND
OTHER
TES
GERMANY
AATUNITED STTA
GERMANY
UNITED
THER OOT
KINGDOM
FRANCE
YALLYITTA
SPNETHERLANDS
CHINA
AIN SPPA
SWITZERLAND
BRAZIL
SWITZERLAND
ST Credit limits 2014: Top 10 countries
VENEZUELA
UNITED STATES
ITALY
BRAZIL
RUSSIA
GERMANY
INDIA
UNITED KINGDOM
TURKEY
FRANCE
OTHER
VENEZUELA
UNITED ST TES AATD STTA
THER OOT
Y
BRAZIL
ALLYITTA
GERMANY
INDIA
RUSSIA
GERMANY
INDIA
UNITED KINGDOM
TURKEY
FRANCE
UNITED KINGDOM
ST Claims Paid 2014: Top 10 countries
IRAN
UNITED STATES
ITALY
GERMANY ARGENTINA
UNITED ARAB EMIRATES
BRAZIL
KOREA REP.
IRAQ
SPAIN
OTHER
THEROOT
THER OOT
IRAN
OREA REPOREA REP.K
Q IRA
AINSPPA
UNITED TESAATSTTA
UNITED EMIRA
BRAZIL
GERMANY ARGENTINA
ARAB UNITED TESMIRAAT
BRAZIL
GERMANY
YALLYITTA
ST Recoveries 2014: Top 10 countries
16
Berne Union 2015
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2010 2011 2012 2013 2014
US
D m
illio
n
Corporates Sovereign Other Public Projects
Banks Lending Unspeci ed
160,000
180,000
200,000
160,000
180,000
200,000
100,000
120,000
140,000
noillm
iS
DU
80,000
100,000
120,000
140,000
0
20,000
40,000
60,000
2010
setraorpoC
ksnBa
2010 2011
ngireveSo
Lending
2012
cilbPur ehtO
deciespnU
2013 2014
sctejPro
2014
MLT New Business – insured during each year
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2010 2011 2012 2013 2014
Commitments -Before Reinsurance
Aid-Related Commitments
Arrears Claims, Political
Claims, Commercial Refinanced/Rescheduled Amounts
Overdues on Refin/Resched Amounts Lending (Total Exposure)
800,000
500,000
600,000
700,000
200,000
300,000
400,000
0
100,000
Commitments
2010 2011
Commitments
2011 2012 2012 2013
Aid-Related Commitments
2014
Aid-Related Commitments Commitments -BefAr
Claims,
Ov
Commitments ance ore ReinsurBeffo
s rearAr
Commerciallaims,
n/Reserdues on ReffiOv Amounts in/Resched
Aid-Related Commitments
oliticalPPoClaims,,
nanced/RescheReffi
otal ExpLending (TTo
Aid-Related Commitments
Amounts inanced/Rescheduled
otal Exposure)
MLT Exposure – at year end
UNITED STATES
ARGENTINA
BERMUDA
TURKEY
SAUDI ARABIA
ETHIOPIA
CHINA
RUSSIA
UNITED ARAB EMIRATES
INDIA
Other
TES
ARGENTINA
AATUNITED STTA
ARGENTINA
Other
A
TURKEY
ARABIA
BERMUD
UDI SA
Other
INDIA ARAB
ETHIOPIA
CHINA
RUSSIA
UNITED ARAB UNITED TESEMIRAAT
MLT New Business 2014: Top 10 countries
UNITED STATES
RUSSIA
TURKEY
BRAZIL
INDIA
SAUDI ARABIA
UNITED ARAB
EMIRATES CHINA
VIET NAM
MEXICO
OTHER
UNITED
RUSSIA
TURKEY
TESAATSTTA
TURKEY
BRAZIL
UNITED
BRAZIL
INDIA
ARABIA UDI SA
ARAB UNITED
THER OT
TECHINA
EMIRAAT
VIET NAM
MEXICO
TES
MLT Exposure 2014: Top 10 countries
Berne Union: Medium/Long-Term Export CreditInsurance and Lending
17
DA
TA A
ND
STA
TIS
TIC
SBerne Union 2015
0
1,000
2,000
3,000
4,000
2010 2011 2012 2013 2014
US
D m
illio
n
Political Risk Commercial Risk Lending
4,000
4,000
3,000
n
3,000
1,000
2,000
oillm
iS
DU
1,000
2,000
02010
lcaitilPo
1201
skiR mmeoC
2012 2013
skiRlarcimme
2013 2014
Lending
MLT Claims Paid – during each year
0
1,000
2,000
3,000
4,000
2010 2011 2012 2013 2014
US
D m
illio
n
Political Risk Commercial Risk Lending
4,000
4,000
3,000
n
3,000
1,000
2,000
oillm
iS
DU
1,000
2,000
02010
litilPo
1201
skiR C
2012 2013
skiRlrci
2013 2014
Lending
lcaitilPo
skiR mmeoC
skiRlarcimme
Lending
MLT Recoveries – during each year
IRAN
RUSSIA UKRAINE
UNITED STATES
KAZAKHSTAN
BRAZIL
ITALY
MEXICO
KOREA REP.
UNITED ARAB
EMIRATES
OTHER
UNITED
THEROT
OREA
Y
MEXICO
ALLYITTA
KOREPREP.
ARAB TES EMIRAAT
IRAN
AN
UNITED ST
BRAZIL
KAZAKHSTTA
TESAATUNITED STTA
RUSSIA
UKRAINE
RUSSIA
MLT Claims Paid 2014: Top 10 countries
EGYPT
INDONESIA
IRAQ
IRAN
PAKISTAN
ARGENTINA
SERBIA
CUBA
UKRAINE
ECUADOR
OTHER THER OT
EGYPT
ADOR
SERBIA
A
UKRAINE
CUB
ECU
AKIST
ARGENTINA
PPA
IRAN
AN
ARGENTINA
TTAINDONESIA INDONESIA
IRAQ IRA
MLT Recoveries 2014: Top 10 countries
18
Berne Union 2015
0
20,000
40,000
60,000
80,000
100,000
120,000
2010 2011 2012 2013 2014
US
D m
illio
n
120,000
120,000
100,000
120,000
100,000
120,000
60,000
80,000
noillm
iS
DU
60,000
80,000
20,000
40,000
20,000
40,000
02010
1201
2012 2013
2013 2014
INV New Business - insured during each year
0
50,000
100,000
150,000
200,000
250,000
2010 2011 2012 2013 2014
US
D m
illio
n
250,000
250,000
200,000
250,000
200,000
250,000
100,000
150,000noill
mi
SD
U
100,000
150,000
50,000
100,000
50,000
100,000
02010
1201
2012 2013
2013 2014
INV Exposure - at year end
KAZAKHSTAN
CHINA
BRAZIL
UNITED STATES
INDONESIA
MEXICO
UZBEKISTAN RUSSIA PERU INDIA
OTHER
ANKAZAKHSTTA
CHINA
THER OOT
BRAZIL
TESAATUNITED STTA
INDONESIA
MEXICO
INDIA RUSSIA
PERU INDIA ANUZBEKISTTA
INV New Business 2014: Top 10 countries
RUSSIA
CHINA
KAZAKHSTAN
UNITED STATES
BRAZIL
INDIA
INDONESIA VIET NAM
EGYPT TURKEY
OTHER
RUSSIA
CHINA
THER OOT
AN
TES
KAZAKHSTTA
AATUNITED STTA
VIET NAM INDONESIA
BRAZIL
INDIA
EGYPT TURKEYT
INV Exposure 2014: Top 10 countries
Berne Union: Investment Insurance
19
DA
TA A
ND
STA
TIS
TIC
SBerne Union 2015
0
50
100
150
200
250
300
350
2010 2011 2012 2013 2014
US
D m
illio
n
Transfer Political Violence Expropriation etc
Breach of Contract Unspeci ed
350
250
300
350
noillm
iS
DU
100
150
200noillm
iS
DU
0
50
100
2010
1201
2012 2013
2013 2014
resfnraT
CfochaBre
lcaitilPo
ctratnoC ciespnU
ceneloiV Exp
deci
ctenoitariproExp
INV Claims paid – during each year
0
20
40
60
80
100
120
2010 2011 2012 2013 2014
US
D m
illio
n
Transfer Political Violence Expropriation etc
Breach of Contract Unspeci ed
120
80
100
noillm
iS
DU
40
60noill
mi
SD
U
0
20
2010
1201
2012 2013
2013 2014
resfnraT
oCfochaBre
lcaitilPo
ctratno eciespnU
ceneloiV Exp
de
ctenoitariproExp
INV Recoveries – during each year
SERBIA
LIBYA
RUSSIA
TURKEY
BOSNIA AND HERZEGOVINA
VIET NAM
THAILAND
INDONESIA
KENYA
VENEZUELA
OTHER
VENEZUELA
THER OOTSERBIA
THAILAND
INDONESIA
A KENYYA
INDONESIA A LIBYYA
VIET NAM
AND
VIET NAM
BOSNIA VINA HERZEGO
RUSSIA
VINA HERZEGO TURKEY
INV Claims Paid 2014: Top 10 countries
VIET NAM
UKRAINE
GHANA
CHINA
COTE DIVOIRE
KENYA
ZIMBABWE
TURKEY
GERMANY
BULGARIA OTHER GERMANY
ABWE
TURKEY
ZIMB
BULGARIA
GERMANY
ABWE
TURKEY
THER BULGARIA
O
VIET NAM VIET NAM
OIRE
A
ABWE
TE DIVCO
KENYYA
ZIMB
OIRE
ABWE
OIRE TE DIVCO
CHINA
OIRE
UKRAINE
GHANA
INV Recoveries 2014: Top 10 countries
2014: Export credit and investmentinsurance resilient, showing steadygrowth
2015: The jury is still out on impactof external factors
Volumes of export credit and investmentinsurance reported for 2014 by members ofthe Berne Union and Prague Club increasedby 4% to reach a total amount of $2 trillion.
Out of this total business volume, morethan $1.7 trillion represented short-term (ST)export credit insurance, while medium andlong-term (MLT) cover provided by officialexport credit agencies (ECAs) amounted tojust over $166 billion. In addition, investmentcredit insurance (INV) amounted to almost$98 billion in new cover.
Against a background of volatile economicdevelopments globally, considerablyweakening energy and commodity pricelevels and increasing geo-political risk hotspots, Berne Union members haveimpressively demonstrated the resilience oftheir commitment. This business evolutionaccentuates the growing awareness of
exporters, importers,investors and banksabout the positivecredit enhancementand trade facilitatingeffects delivered bythe export creditindustry over the pastyears, with BerneUnion memberssupporting about 10%of international tradein 2014.
Total claims paidby Berne Unionmembers during 2014amounted to $4.661billion, an increase of3.6% compared to theprevious year.Compared to 2013 STclaims increased to
$2.007 billion (+4.9 %), MLT claimsamounting to $2.427 billion remainingbasically unchanged, however, and INV claimsrecorded a rise of 54% to $227 million
Since the beginning of the global financial
20
ECAs continue tomake a difference indifficult globaltrading conditionsBy Kai Preugschat, secretary general, Berne Union, and Laszlo Varnaiassistant director, Berne Union
Kai Preugschat
Laszlo Varnai
Berne Union 2015
Against a background of volatile economicdevelopments globally, considerably weakening energyand commodity price levels and increasing geo-politicalrisk hot spots, Berne Union members have impressivelydemonstrated the resilience of their commitment.
crisis in 2008, Berne Union members haveindemnified approximately $28 billion toexporters, investors and banks, compensatingthem for losses suffered due to defaults byobligors caused by commercial and politicalrisk.
Thus, Berne Union members have providedample and flexible risk capacity to supportinternational trade and cross-borderinvestment transactions, fostering sustainableeconomic growth.
–––––––––– ––––––––––Berne Union members continued to observean unyielding demand level due to greaterrisk awareness of exporters and investorsalthough coupled with a slower closing rate,in particular for capital goods andinfrastructure contracts during the first half of2015. It is too early to draw conclusions foroverall trends, as many Berne Union clientsreport a healthy transaction pipeline. Theaforementioned slower conversion rate may,however, very well be an indication of thecurrent multiple economic pressure pointsimpeding the growth of world trade.
Short-term business – solid growth,still in a good shape but growingpressure on pricing
Short-term business represents insurance ofexports with repayment terms of less thanone year – often 30, 60 or 90 days. Thesetransactions are typically shipments ofconsumer goods, with the movements of STexport credit insurance closely linked with theups and downs of the broader globaleconomic environment.
The volume of ST export turnover insuredby Berne Union members grew by 4.1% in2014 and reached $1.709 trillion. This issignificantly higher than the average growthrate for international trade during the pastyear. The rising demand may indicate aspreading awareness of the benefits resultingfrom the use of risk mitigation products to
protect international sales transactions.To support these exports, the insurance
capacity provided by Berne Union members,measured by the amount of credit limitsapproved and granted to exporters at a givenpoint in time, stood at over $1 trillionthroughout 2014. At the end of the year, thecapacity reached $1.051 trillion, -4% below thehighest levels ever recorded in 2013. Achievingturnover growth while reducing risk limitsdemonstrates a greater efficiency and focus ofthe short term credit insurance industry.
ST claims paid by Berne Union members,to indemnify exporters for defaults on theirtrade receivables, rose from $1.913 billion in2013 to $2.019 billion in 2014. While this 5.5%increase is slightly higher than the 4.1%turnover growth rate of the business, theoverall default to turnover ratio of 0.118%continued to reflect sound underwritingpractices. For most of the membership, STclaims paid have actually remained relativelystable. Yet the total claims figure certainlyincludes a number of larger defaults thatmainly occurred in some of the current riskhot spots.
The strong competition among BerneUnion members and from alternativeproviders for export risk protection such astrade finance banks and multilateralinstitutions resulted in a more favourablepricing environment for exporters. While notall members report premium data, the trendis pretty compelling: the ST loss ratio (i.e.claims paid as a share of the premiumsearned) for Berne Union members continuedto increase, now standing at about 56% after49% in 2013 and 48% in 2012.
In 2014 the ECAs recorded higher ST lossratios than their private peers. A crediblecause is that, by mandate, the ECAs operatein a special gap to support their nationalexporters, in particular where commercialinsurance cover might otherwise be difficultto obtain.
The highest volumes of ST claims paid per
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SBerne Union 2015
Since the beginning of the global financial crisis in2008, Berne Union members have indemnifiedapproximately $28 billion to exporters, investors andbanks, compensating them for losses suffered due to defaults by obligors caused by commercial andpolitical risk.
country in 2014 resulted from defaults inVenezuela ($173 million), USA ($165 million),Italy ($110 million), Brazil ($90 million), andRussia ($76 million).
Berne Union members paid claims due tocommercial buyer defaults in the UnitedStates and European countries, representingthe largest international trade volume regionsand the largest ST exposures for Berne Unionmembers. Supported trade and thus exposureof members to Brazil has also remained on arelatively high level in recent years.
In 2014 only a very limited number ofBerne Union members provided STprotection for exports to Iran, whereas asignificant amount of claims paid earliercould be recovered from Iran. The decliningenergy price level has impacted the riskcapacity for Venezuela which was severelyrestricted in 2014. Due to the tightening ofthe sanctions imposed related to the ongoingconflict, preparedness to underwrite risk inRussia and Ukraine was also curbed.
ST does not report its actual turnoverexcept for the full year. During the first half of2015, in line with the trend observed during2014, overall country limit commitments werecut to now $999.7 billion, a reduction inexcess of 13% when compared to the first halfof 2014. ST turnover for the full year 2014continued to rise versus the full year 2013despite an initial round of limit cuts, yet thecompetition from excess bank liquidity mayhave a stronger impact in 2015. Whilerationing of commitments has continued
throughout a number of mature andsaturated OECD markets, the largest singlecountry limit reduction was observed forRussia to $9.6 billion – a cut in excess of 50%.
During the first six months of 2015members have honoured $912 million inclaims, a moderate decrease when comparedto the first half of 2014 (minus 3.5%).
During the same period, recoveriesamounted to $167 million, completely in linewith the first half of 2014 (minus 1%).
Medium and long-term business –demand for ECA cover still abovepre-crisis levels in 2014 but off to aslow start in 2015
The MLT statistics of the Berne Union captureexport insurance coverage is provided byofficial state-backed ECAs only. Alongsideinsurance business, some ECAs in the BerneUnion also provide direct financing, which isalso reflected in the data and representsapproximately 7.7% of the total businessreported, after 8.75% in 2013 and 12.87% in2012.
MLT export credit insurance covers exportsof capital goods. These are transactions withlonger repayment terms of typically five toseven years, and up to 10 or even 15 years forrenewable energy and certain infrastructureinvestments in some cases. Most of the businessis conducted with banks as the insured.
The total portfolio of MLT transactionsinsured by Berne Union ECAs reached $701 billion at the end of 2014, representing aslight decrease of 0.9% versus 2013, when thehighest ever exposure was recorded.
New export credits covered in 2014increased by 3.1% to $166 billion. This is stillhigher than the volume of new MLT businessbefore the global financial crisis, yet lowerthan the record years 2009 and 2011 ($191billion in both years), indicating that financialmarkets have stabilised.
The slight decline of the overall portfoliosize indicates that orderly repayments fromthe high volume underwriting during theearly financial crisis years are in full flow.Thus, MLT ECA business is expected to returnto more normal levels. Whether there will bea new normal at higher levels than before2008 remains the big question; increasinglynon-OECD ECAs, especially China’s Sinosure,continue to grow their share of the MLTbusiness.
In 2014 new business for the large ECAs inOECD countries, with very few exceptions,
22
Berne Union 2015
The $874 million claimspayments reported for the first six months in 2015 were substantially(minus 41%) lower thanduring the same period in2014 when, membersindemnified clients for an amount of $1.484billion claims.
has decreased or remained flat. This is less aresult of a change in cover policy by theECAs but reflects the underlying deal flowwhich appeared somewhat suppressed, atleast partially as an impact of the sanctions inRussia where new business declined by 20%when compared to 2013.
Claims paid to customers by ECAs underMLT transactions amounted to $2.427 billionin 2014, a minimal reduction of 0.5% whencompared to 2013 defaults. The highestamounts of claims paid per country were dueto defaults in Iran ($916 million), Russia ($296million), Ukraine ($187 million), USA ($172million), and Kazakhstan ($97 million).
The background to the various claimssituations is specific and differs significantlyfrom country to country and case to case. Anumber of Berne Union ECAs have beenaffected by the Iranian sanctions situation,with obligors experiencing severe difficultiesto effect payments abroad. While claimspayments for exposure in Iran are almost
exclusively linked to long-term transactionsentered into prior to the imposition of thesanctions, almost no new cover for Iran hasbeen issued in 2013 and 2014.
In Russia, although the environment andthe cause for defaults are largely different, anumber of ECAs have been affected byincreasing losses; here the claims paymentsappear to be closely linked to the weak pricelevels for energy and mining resources.Whereas the relatively high number of claimsin Ukraine seems to be directly linked to theunresolved conflict, and as a result Ukraine’sshrinking national economy.
However, the diversity of causes triggeringclaims in multiple countries illustrate thenecessity for official support in gap areas thatmay affect exports across the globe. Thesupport of ECAs appears to be more thanever crucial to help banks and exporterstrade internationally.
–––––––––– ––––––––––For the first six months of 2015 MLT recordeda markedly lower new business volume of$59.5 billion, a decrease of 20% whencompared to the first half of 2014. Given thestrong impact of larger transactions on thereported underwriting level combined with anoften observed higher deal conversion rateduring the second half of any year, it appearstoo early to draw conclusions about a generaltrend. Nevertheless this noticeable reductionshould be considered as a strong reminderthat the continued market volatilities mayindeed result into a slowdown for somesectors.
The $874 million claims payments reportedfor the first six months in 2015 weresubstantially (minus 41%) lower than duringthe same period in 2014 when, membersindemnified clients for an amount of $1.484billion claims.
Recoveries improved by more than 18% to$1.413 billion during the first half 2015.
INV encouragingly resilient in 2014and during the first half of 2015
Under INV, Berne Union members reportInvestment insurance product variations,namely investment insurance for overseasinvestment against political violence,expropriation, transfer and convertibility risksas well as their non-honouring of sovereignobligations credit insurance products,providing cover against the inability orunwillingness to pay by sovereign and sub-sovereign obligors. INV also includes other
23
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All eyes on AfricaAfrica is a continent full of opportunities,where generally new underwriting figureshave shown a continuous upwards trend inrecent years. Yet there is a significant riskhistory and many African countries feelthe impact of falling price levels for naturalresources and weakening currencies.
Berne Union members newcommitments for short-term tradereceivables grew only slightly to $35.971million in 2014 (minus 2.75% versus 2013),while claims payment remained volatile at$176 million last year, a 57% increase over2013. Recovery levels reached $23 millionby year end 2014 (minus 21%).
MLT total exposure reached a record$78 billion in 2014 with the volume of newcommitments growing by 55% whencompared to 2013. Claim payments forMLT transactions reduced year over yearto $49 million in 2014 (minus 75%),recoveries amounted to $776 million in2014 (plus 48%).
The total INV exposure is growingcontinuously, amounting to $39 billion at2014 year-end. For African investmentsinsurance transactions $49 million claimswere paid in 2014, concentrated in Libya($30 million), Kenya ($7.5 million) and Mali($4.8 million), overall 49% higher than ayear earlier.
credit insurance protection against politicaland commercial risks for bonding and untiedloans.
The overall INV portfolio amounted to$234 billion at the end of 2014 (minus 4%versus 2013), with new underwriting of $98billion (minus 1.8%).
In 2014 for investment insurance thelargest indemnifications were paid for casesin Libya ($29.9 million), Russia ($26.3 million),Turkey ($22.2 million), Vietnam ($10.2 million)and Venezuela ($7 million). For non-honouring of sovereign obligations thelargest claims were paid for defaults inThailand ($12.5 million), Vietnam ($10.1million), Kenya ($6.4 million), Belize ($3.2million) and Bosnia and Herzegovina ($3.1million). Within the remaining product line ofinvestment insurance largest indemnifiedclaims were related to obligors domiciled inSerbia ($35.4 million), Bosnia andHerzegovina ($18.8 million), Indonesia ($9.8million), China ($3.8 million) and Singapore(U$2.4 million).
In 2014 recoveries amounted to $63.6million, 18% below the 2013 level.
–––––––––– ––––––––––During the first half of 2015 new INV coverprovided amounted to $49.8 billion,remaining at the identical level as during thefirst half of 2014.
Claims payments for INV during the firsthalf of 2015 stood at a relatively low level with$63 million of indemnifications (minus 50%when compared to the first half of 2014).Reported recoveries during the first half of2015 stood at $7 million only (minus 71%).
Prague Club members
The Prague Club is the home of emergingexport credit insurance companies generallywith a more recent operational history andoften domiciled in frontier markets. Currentstatistics by Prague Club members allow toassess the performance of both ST and MLTinsurance activity.
Thus Prague Club members succeededagain, growing their ST new businessvolumes by 14% during 2014 over 2013,reaching a record volume of $25 billion,thereby earning $85 million premium forcovering ST trade receivables which is almostthe same as last year. This highlights that
increased competition has led to fallingpremium levels in frontier markets, too.Claims payment for ST transactions remainedstable at $30 million (-17% compared to2013). The ST loss ratio reached 34% which isbelow the reported 56% level for Berne Unionmembers during the same period.
On the other hand, after two strong years,new MLT business figures dropped back by28% to $3.8 billion, with the overall exposuresreduced to $20.8 billion at 2014 year end(minus 12%). The earned premium levelalmost halved to $133 million. Claimspayments for MLT business have increased to$438 million in 2014 (plus 320% vs. 2013).
Prague Club members succeeded again,growing their ST new business volumes by14% during 2014 over 2013, reaching a recordvolume of $25 billion, thereby earning $85million premium for covering ST tradereceivables, which is almost the same as lastyear. ■
24
Berne Union 2015: Data
In Russia … a number ofECAs have been affectedby increasing losses; herethe claims paymentsappear to be closelylinked to the weak pricelevels for energy andmining resources.
Prague Club members succeeded again, growing theirST new business volumes by 14% during 2014 over 2013,reaching a record volume of $25 billion, thereby earning$85 million premium for covering ST trade receivableswhich is almost the same as last year.
Berne Union 2015
Berne Union 2015
3Expert analysis
State export credit agencies (ECAs) make asubstantial contribution towards boostingexports, along with growth and prosperity, inemerging and developing countries. In doingso, they do not compete with the privatemarket. Instead, the coexistence of privateand state support ensures that adequateinsurance cover exists at all times and marketsituations.
However, as the global market is a movingtarget, ECAs will have to stay adaptable interms of strategies, products, services andprocesses to fulfil their mission in the future.One important challenge is the increasingglobalisation of value chains, leading to aconstant pressure on foreign content rulesand triggering enhanced risk-sharing models.
ECA – a stabilising element in theglobal trading system Before the recent financial crisis, the financialcommunity was increasingly questioningwhether ECAs would be needed at all in thefuture. However, the discussion came to apreliminary end as marketable risks turnednon-marketable during the crisis. As a result
many cross-bordertrade relationshipscould only besustained with thesupport of ECA cover.
This developmenthas led to a broadawareness that ECAsare a necessary andstabilising element inthe global trading
system. Also it turned out that the privatemarket and ECAs, as complementary pillars,together provide the risk mitigationcapacities needed. It is therefore reasonableto forecast that ECAs will continue to play animportant role in global trade on a long-termbasis, even as the private market regainsmomentum.
ECA support creates and sustainsjobs at home and abroad The economic benefit of ECAs has beenrepeatedly scientifically proven – mostrecently in 2015 by the renowned German IfoInstitute for Economic Research (ifo). The
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Berne Union 2015: The stabilising role of ECAs in global trade
The adaptable mandateof ECAs in a globaltrade credit insuranceecosystemBy Edna Schöne, board member, Euler Hermes Aktiengesellschaft AG
Edna Schöne
State export credit agencies (ECAs) make a substantialcontribution towards boosting exports, along withgrowth and prosperity, in emerging and developingcountries. In doing so, they do not compete with theprivate market.
study once again documents the export-creating effect of the German ECA (Hermesinsurance cover) and underscores theimportance of this instrument to secureexisting jobs and create new jobs in Germanyand abroad.
According to the ifo study, in the past tenyears an average of 200,000 employmentrelations were directly or indirectly associatedwith Hermes cover. Export transactionsgenerated by Hermes cover secure andcreate some 85,000 jobs each year. Foreigncountries likewise stand to benefit fromGerman federal export credit guarantees.Between 10,000 and 25,000 jobs outsideGermany are directly associated with Hermesinsurance cover according to the ifo report.
Globalisation reinforces interactionHowever, in order to continue this successstory, ECAs need to adapt to a changingtrade environment. This does not only entail aconstant redefining of their own risk-appetitein a fast changing risk environment in manyof the ECA’s target markets, but also to takeinto account the structural changes of today’strade patterns. In fact the ongoingglobalisation of production leads to strongerglobal interaction.
To offer a competitive contract price, it isoften mandatory for an exporter to includedeliveries from third countries into a project,be it from its own foreign subsidiary or fromforeign suppliers. This is especially the case inthe construction of larger infrastructureprojects and in plant engineering andconstruction. This puts pressure on foreigncontent rules, particularly in countries likeGermany, which follows the ‘made inGermany’ approach to measure eligibility forECA support. It also triggers an increasingneed to look for new risk-sharing models withother players.
This development has led to an increasingnumber of cooperation, co-insurance andreinsurance agreements between ECAs indifferent countries, but also between ECAsand private market players or multinational
institutions. As an example, Euler Hermes, asthe German ECA, today has cooperationagreements with ECAs from 37 countries,predominantly with ECAs in OECD countries.
Taking into account the important role ofnon-OECD countries in today’s export financeworld, it is not surprising that the interest incloser cooperation beyond the OECD isgrowing. Furthermore, Germany currentlyassesses cooperation models with othermultinational players and the private marketfor selected risks and, in particular, for foreignportions of an export transaction. However,such models need to be designed on a soundbasis, including legal aspects such as publicprocurement law.
ConclusionState export credit guarantees have ademonstrably positive economic effect. Theylead to additional exports and have a positiveimpact on the labour market. The privateinsurance industry, in turn, benefits fromECAs because the state also keeps marketsafloat in difficult times with its hedgingfacilities and also plays a pioneering role indeveloping new markets for the exportindustry. In the future, ECAs will have toadapt to many challenges, one of them beingthe increasing global interlacing, which willfurther intensify interaction between allexport finance related stakeholders. ■
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Berne Union 2015: The stabilising role of ECAs in global trade
Taking into account theimportant role of non-OECD countries in today’sexport finance world, it isnot surprising that theinterest in closercooperation beyond theOECD is growing.
In the future, ECAs will have to adapt to manychallenges, one of them being the increasing globalinterlacing, which will further intensify interactionbetween all export finance related stakeholders.
The idea that capacity-building initiatives actas an important engine for tradedevelopment is in its infant phase. But thetheme is becoming one of the mostfrequently invoked creative tools in recentdebates on economic development. Capacitybuilding aims at “enhancing the ability toevaluate and address the crucial questionsrelated to policy choices and modes ofimplementation among development options,based on an understanding of environmentpotentials, limits and needs perceived by thepeople of the country concerned”*, accordingto the United Nations. A widely accepteddefinition of the term is still lacking and adebate on the most effective initiatives thatshould be implemented through this tool is ongoing.
SACE’s experience in the field during thepast decade – also jointly with other ECAs –provides a solid contribution to this debate.Several BU members have developedprogrammes aimed at sharing their know-how to provide a better understanding of thebenefits of export credit to private-sectorbanks, exporting companies and their
foreign peers. These activities
significantly increasedin recent years andmore resources havebeen dedicated byseveral financialinstitutions tocapacity-buildingprogrammes. SACElast year set up a
dedicated unit – Global Solutions – whichprovides training and advisory services toECAs, international and public institutions,multilaterals and banks. ECAs weretraditionally created as a government-policyinstrument to support national companies intheir export business or investment activitiesabroad. But what is the role they can play inthis field today? The world and the globaleconomy have changed significantly duringthe past decade. Globalization has impactedthe fortunes and strategies of most emergingmarkets.
Three of the latest key factors in theevolution of trade are highly relevant to the
30
Berne Union 2015: Sace – Cooperation in export finance
Capacity building is a‘win-win’ strategy forboth ECAs and theircustomersMichal Ron, managing director, head of international business, SACE, arguesthat knowledge-sharing and cooperation in the export finance industry is aquick-fire way of boosting both international trade and its participants.
Michal Ron
ECA activities in the capacity-building field can be usedas an efficient and beneficial tool for enhancing worldtrade by increasing awareness of export creditinsurance in emerging markets.
implementation of capacity-buildingprogrammes:
Growing importance of emerging markets tointernational tradeWith the advanced economies largelyevolving from manufacturers to serviceproviders, developing countries have beengrowing in importance to world trade. Anincreasing number of emerging markets havesucceeded in climbing the developmentladder, diversifying their production fromprimary commodities to manufacturedgoods.
Financial integration of emerging marketsThe impressive growth of the private sectorin emerging markets allowed for direct accessto international capital markets. But since thefinancial crisis an increasing number ofcountries have been experiencing the need todiversify their sources of financing.
Increasing integration of manufacturingcompanies as a consequence of de-localisationThis process has damaged SMEs, particularlyin the advanced economies, as they tend to lose competitiveness within the globalarena.
Bearing in mind these structural changes,SACE has identified three strategic areas forintervention and support of trade throughcapacity building:
Technical assistance programmes fornewly-created or established ECAs inemerging markets, supporting theirnational exporters and aiming atpositive effects on their respective tradebalance. Training seminars for local banks andpublic institutions, enhancing the rangeof financial services offered to theirclients through the inclusion of exportcredit products.Support to SMEs in both theirinternationalisation process and theirability to access new frontier markets.
These three programmes providereciprocal advantages and are described inmore detail below.
Newly-created vs established ECAs Several ECAs have developed technicalassistance programmes in the past five yearsdevoted to the set-up of new national exportcredit agencies. These programmes varysignificantly, from preliminary support to
governments and supervisory authoritiesduring the decision-making stage, to theoperational implementation of the newnational agency. SACE has consistentexperience in the field, having successfullycontributed to the establishment of:
SMECA, Serbia-Montenegro. Thetraining project was developed incollaboration with the World Bank(WB), in order to expand cross-bordertrade and relieve the country of itsdependency on donations. The WB co-financed the new ECA establishment,while SACE organised the trainingnecessary to transfer expertise to bothSMECA and local exporters.EXIAR, Russia. The Russian authoritiesset up EXIAR in 2011, with the objectiveof increasing and diversifying Russianexports to new markets. SACEsupported the process from thepreliminary to the implementationphase, through a dynamic approachaddressing EXIAR’s specific needs.The new Georgian ECA, 2015. SACE hasrecently provided capacity-buildingservices targeted at establishing a newECA in Georgia, which is expected tocontribute to the country’s balance ofpayments by enhancing thecompetitiveness of Georgian companiesand their export activity.
Capacity-building programmes may alsorepresent a significant tool for establishedECAs that wish to further develop andexpand their operations, adding on newproducts or enhancing specific skills through‘tailor-made’ training. For ECAs mainlyfocused on short-term business, enhancingstaff knowledge and expertise related tomedium to long-term products can assist indeveloping new lines of business andcovering new markets.
Similarly, ECAs currently operating mainlythrough traditional export credit may beplanning to extend the scope of their supportto assist clients with internationalisation,working-capital facilities and strategictransactions. With respect to risk-relatedtopics, requests mainly address riskmanagement from a portfolio perspective aswell as credit risk analyses includingcounterparty, country and sovereign risk.Other ECAs are eager to increase theircustomer-base through commercial-strategytraining aimed at developing a pro-active‘client-driven’ rather than a ‘transaction-driven’ approach.
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Banks and public institutions In emerging countries, capacity-buildingprogrammes frequently cater to banks,ministries or other public institutions, with theunderlying aim of sharing expertise on exportcredit and trade finance, including bestpractices and governance. Trainingprogrammes effectively constitute anextremely efficient instrument to raiseawareness of the benefits of trade finance,and prepare adequate financial tools to fostercross-border trade, support exports andimprove the balance of payments.
With this underlying objective in mind, aworking group was set-up in 2013 by theBerne Union, in collaboration with the WorldBank, with the aim of enhancing cooperationbetween the two organisations. Three majorareas of joint collaboration were established,with SACE leading the capacity-building taskforce – together with the IFC, PwC, Zurich,ATI, ECGC and Sinosure. The groupstructured a joint training programmespecifically addressing local players inemerging markets, with a focus on Africa.
The underlying objective of the BU-IFCtraining partnership was combining theexpertise of ECAs and private insurerstogether with the IFC’s consolidatedexperience in emerging markets and itsglobal network. The group's combinedexperience in the training field and specificknowledge of the East African marketdictated an agenda focused on the use oftrade-finance instruments, and means ofmaximising the use of export credit in thecurrent phase of economic development ofcertain sub-Saharan countries. Africa wasconsidered a highly relevant starting point forthis ground-breaking initiative because of itssound growth figures and vast investmentpotential. Special attention was focused onassisting local banks in building new businessaround export-credit financing and insurance,contemporaneously increasing regional trade.
The capacity-building task force workedon a pilot project, culminating in a joint BU-IFC training seminar in Nairobi, Kenya, lastJuly. BU and IFC executives presented tradeand project finance risk-enhancementinstruments to local banks based in Kenyaand its neighbouring countries. The seminaralso included a special session with Kenyanbanks’ chief executive officers to raise theirfamiliarity at a strategic level. It is intendedthat this form of capacity building aimed atlocal banks will be replicated in otheremerging markets and located in differentgeographical regions.
Creating opportunities for SMEs Exporting SMEs is an additional target forcapacity-building services. In this field, SACEis committed to supporting Italian SMEs inevery stage of their internationalisationprocess, especially in frontier markets whichare particularly complex and challenging.
SACE developed Frontier Markets in 2014 –a programme providing SMEs not only withinsurance and financial products to supporttheir exports and investments but also abroad range of advisory and training services.Frontier Markets assists Italian SMEs inidentifying those emerging markets with thehighest potential, while at the same timeproviding the tools to evaluate associatedrisks and relevant mitigation instruments. TheFrontier programme offers a range ofservices: the selection of potentialcounterparties, provision of specific advisoryservices and financial products in line witheach country’s specific businessopportunities, and subsequent business tripsaimed at matching the exporters’ offer withlocal demand.
The focus has so far been on sub-Saharancountries. An initial successful result of theprogramme consists of the launch of apartnership between a consortium of 11 Italiancompanies, the Kenyan Kerio Valley
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We are adamant that the sharing of knowledge is a powerful tool to promote economic developmentand cross-border trade. The capacity-buildingprogrammes undoubtedly lead to multiple benefits in both emerging and developed markets as they build upon decades of expertise, technical capacity and accumulated experience in international markets.
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Development Authority (KVDA) and MoiUniversity in Eldoret, western Kenya, for theset-up of a dairy farm. The estimated projectvalue is around €25 million and it willcontinue for a duration of 16 months. Thepilot project is expected to enhance the dairyvalue chain in northern Kenya.
Through the Frontier programme, SACEoffers 360° support. It plans to replicatesimilar partnerships in other regions as theseproduce reciprocal benefits for all partiesinvolved. On the one hand, this project isexpected to contribute to economicdevelopment by rendering the region self-sufficient (ie for the production of food),while on the other, SACE's role has allowedItalian SMEs to identify a profitable marketniche within the highly competitive globalarena.
ConclusionsECA activities in the capacity-building fieldcan be used as an efficient and beneficial toolfor enhancing world trade by increasingawareness of export credit insurance inemerging markets. The scope of training mayvary significantly. It can address a widevariety of both subjects and counterpartiesconstituting the business environment.Consolidated expertise is fundamental toestablishing and developing institutionsdedicated to supporting national enterprisesand promoting international trade. Localbanks in many less-advanced markets areincreasingly willing to raise theircompetitiveness in international trade financeby widening their respective product range.Training programmes can also provideassistance to SMEs in identifying marketniches and new business opportunities.
When viewed from the perspective of therecipient, capacity-building initiativespositively affect the destination countries. Weare naturally investing in the medium to long-term by developing capacity-buildingprogrammes as these eventually generateindirect benefits also for the promoting ECAand its national economy. The establishmentof new ECAs facilitates collaboration also
through co-insurance and re-insuranceagreements with new local partners inemerging markets. The practicalimplementation of such agreements isfacilitated by the assumption that all partiesare applying international best practices. Itshould also be noted that re-insurance andco-insurance agreements have gained agrowing importance in recent years, mainlydue to the ‘unbundling’ – or fragmentation –of the production chain across countries.
In addition to cooperation on transactionsand industrial programmes, the presence ofkey local partners favours the exchange ofstrategic information on relevant political andcommercial matters and facilitates decision-making processes. A wider knowledge anddiffusion of export credit and trade financewould increase business opportunitiesinvolving local players in emerging marketsby expanding the range of products offeredby the ECAs in tandem with the banks.Finally, capacity-building support to SMEsgoes a long way towards promoting thecountry’s economic development, whichengenders new business.
We are adamant that the sharing ofknowledge is a powerful tool to promoteeconomic development and cross-bordertrade. The capacity-building programmesundoubtedly lead to multiple benefits in bothemerging and developed markets as theybuild upon decades of expertise, technicalcapacity and accumulated experience ininternational markets. The immediatebeneficiaries of the capacity-buildingprogrammes are above all the exportingcompanies and the local financial players,including new export credit agencies.However, over the medium to long-term, thebenefactor ECAs will see further fruits of theirlabour, together with an overall increase intrade flows: undoubtedly, a ‘win-win’ strategyfor all involved. ■
Note*United Nations Conference Sustainable Development(1992), Agenda 21, United Nations Conference onEnvironment & Development (Chapter 37).
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A wider knowledge and diffusion of export credit andtrade finance would increase business opportunitiesinvolving local players in emerging markets byexpanding the range of products offered by the ECAs intandem with the banks.
You might be thinking: ‘here comes anothertiresome article on regulation, only repeatingwhat I’ve heard a hundred times before.’ Butlet me assure you, the new era of regulationhas only just begun and you cannot escape it– whether you are an exporter, an exportfinance specialist in a bank or an underwriterat an export credit agency (ECA), private riskinsurer (PRI) or development financeinstitution (DFI). So the industry as a wholehas to find answers to the challenges ofregulation and to the expectations of an alertand (sometimes) suspicious society.
The evolution of the regulatoryenvironmentA phenomenon rarely seen before in thehistory of the modern banking industry, thefinancial crisis was a major landmark in thedevelopment of regulation. Governmentsworldwide came under pressure for thetremendous amounts they spent on rescuingthe banking system. Banks lost the citizens’confidence and tried to do their best to bringthe public back on side by reinforcingtraditional rules of real economy-drivenoperations. Several scandals (Libor, forexample) did nothing to recover the banks’reputation or the public’s trust in them. Today
the view persists thatbanks deserved theregulatory treatmentthey received andshould not be savedwith public moneyagain.
Even if immediateactions by the BaselCommittee, G20,European
Commission, Federal Reserve System,European Banking Authority, and otherregulators, were seen as direct consequencesof the financial crisis in 2008, the experiencefrom Basel I in 1988 (underlying capital rules)and Basel II in 2004 (risk-related allocation ofequity, operational risk, banking supervision)has already paved the way for the next steps.In the beginning, the attention on adequatefunding was seen as the major achievementof Basel III (and reaction to the crisis).Whereas today, it is widely acknowledgedthat the leverage ratio is by far the biggestpotential threat for business with a low-riskprofile, ie trade and export finance.
If banks want to maximise revenues tomeet shareholder expectations, it is clear that– as long as capital is a scarce resource – the
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The era of regulation –new challenges for tradeand export finance Ralph Lerch, chair of the European Banking Federation’s export creditworking group, and global head of export finance at Commerzbank, discusses the shifting tectonics of the regulatory environment facing tradeand export finance.
Ralph Lerch
It is widely acknowledged today that the leverage ratiois by far the biggest potential threat for business with alow-risk profile, ie trade and export finance.
business that offers the highest yield ispreferred. But let us first have a look at themajor elements of Basel and the CapitalRequirements Regulation (CRR) beforestarting to highlight unintendedconsequences (or outlining targets andpotential adjustments to protect trade andexports).
Major regulatory ruling so farIt is highly likely you have never read all theBasel recommendations or CRR articles, solet me summarise the most importantelements and ratios. Assuming that bettercapitalised banks are more prepared forpotential credit losses, the capital ratio is akey element of Basel. The target of 10.5%(plus a stricter Tier 1 ratio), to be reached by2019, has already been largely achieved andthe number of banks which failed to do soreduced significantly from 2011 to 2014. Sofar, nothing to complain about.
Risk weighted assets (RWAs) are also anindicator for internal capital consumptionmainly based on ratings, durations and creditconversion factors (CCF). Therefore, differentratings for sovereigns will lead to differentrisk-weighted assets (RWAs) for ECAs.Whereas short-term letters of credit (LCs) areassigned a 20% credit conversion factor(CCF), and technical guarantees and undrawnamounts on signed facilities a 50% CCF, itwould be important to secure a 0% CCF onthe portion covered by the ECAs as agreed inBasel I and II.
Liquidity Cover Ratio (LCR) and NSFR:Ratios related to liquidity shall ensure thatbanks have sufficient unencumbered, high-quality liquid assets (HQLAs) to set off thepotential net cash outflows. Banks arerequired to increase HQLAs – ECA-coveredloans do not qualify at present – and toreduce committed lines. In parallel – and as afurther result of the crisis – banks needed toraise long-term (LT) funding to refinance LTloans. Consequently, new players haveentered the market to offer LT funding, eginsurers, investment managers and pensionfunds. ECAs and banks have also done a lotto comply with the aforementioned ratios –as seen in the launch of refinancingprogrammes, funding guarantees and direct-lending solutions. So funding is not seen ascritical at the moment but those new toolsmay show their value at a later stage.
The most sensitive ratio by far for exportfinance, as a low RWA binding business, is theLLeverage Ratio. If the low-risk profile of ECA
cover is not be recognised, export finance willbe competing with riskier exposures thatoffer better returns. In other words: to reducean increase in financial leverage due to lowRWA bindings is a reasonable approach inlight of the crisis. But it should be feasible todifferentiate. The current status does notsufficiently value the nature of exportpromotion schemes with governmentalbacking, and the need for the double defaultof the borrower and the ECA to cause a realloss. This argument also demonstrates whyexport finance exposures do not result inlarge unexpected losses.
Recent proposals by the Basel Committeeto adjust the Standard Approach have nottaken into account this mechanism forexport finance.
The impact of CRR on medium tolong-term (MLT) export financeCRR is the European legislative initiative totransfer Basel III standards and requirementsinto European law. In force since 2014, it isseen as the new bible for all areas of bankingactivities, including covered bonds (as apotential instrument to refinance ECA-covered loans). Hastily drawn up, it containsvarious definitions and redundancies. Besidesthe mechanics of the aforementioned ratios,it is worthwhile mentioning that fulfillingArticle 194.1 CRR, concerning the validity ofECA cover in particular, is seen as almostuseless, and a very expensive exercise.
CRR 194.1 stipulates that “the lendinginstitution shall provide, upon request of thecompetent authority, the most recent versionof the independent, written and reasonedlegal opinion or opinions that it used toestablish whether its credit protection
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At the moment it seemsthat no single regulatorymeasure is the final nail inthe coffin for exportfinance, but it may turnout that sooner or laterthe sum of all regulationwill reduce participantsand capacity.
arrangement or arrangements meet thecondition laid down…”
The clause can also be understood asmistrust in the European government‘s ownexport-promotion schemes, but in practice ithas turned out as a major employmentprogramme for law firms. Why? Many ECAsor other relevant public institutions have sofar refused to issue such Legal Opinions(LOs). Banks could use their internal legaldepartments to issue such LOs but, given thefact that each ECA issues itsguarantees/insurance policies based on itsnational jurisdiction, law firms are needed (in-house lawyers specialised in export financetend to be proficient in assessing 1, 2 or 3different jurisdictions, so depending on thebusiness model of the bank, 15-20jurisdictions are left for external lawyers). Tobe on the safe side, it might be worthwhile tohave a LO (or at least a reference) for eachproduct an ECA is offering.
With no reliable ruling by the EBA thus faron how often these LOs need to be refreshed(‘most recent version’), this exhausting andexpensive exercise is likely to continue overthe next couple of years – even in theknowledge that no overwhelming newsubstance or data will be generated. Wasthere a chance to convince the regulators ofsuch consequences? Not really – there wasn’tmuch appetite for direct dialogue with thebanks. Therefore various initiatives have beenstarted to reduce costs and complexity,knowing that the only likely chance to copewith Article 194.1 is to, once the LOs havebeen issued in all major countries, return tothe regulators with the lessons learned.
It is worth mentioning that, based on aninitiative from the European BankingFederation (EBF), the Export Credit WorkingGroup (ExCred WG) and national bankingassociations in several European countrieshave joined forces (and shared costs) toapproach law firms to issue the LOs requiredby CRR. This allows the sharing of the LOamong banks and banking associations lateron – provided that the law firms have agreedto this. Unsurprisingly the content of the LOsalready issued differs a lot, and not onlybecause of the various underlying
jurisdictions. Potentially this could be thebeginning of a discussion with the regulatorson the different legal settings of the ECAs,and the general conditions and obligations tobe fulfilled by the insured.
‘Operational’ regulation – today’sunderstanding of AML, KYC,compliance and sanctionsRegulatory pressures regarding anti-money-Laundering (AML) have continued to riseover the last couple of years. Even if the legalroots date back to the 1980s, there is acommon understanding today that 9/11 haschanged the way legislators look at thetransparency of banks and corporateactivities. Legislation – such as the EUPayment Regulation, Germany‘sGeldwäschegesetz (GwG) or the FCA’sMoney Laundering Regulations 2007 in theUK – has been set up, widened and adjustedregularly. Due to the nature of trade andexport finance, banking authorities, auditorsor the management of a bank tend to lookimmediately at borrowers in emergingmarkets when they look to identify theweakest areas of compliance in the bank.
Carrying out a proper on-boarding offoreign customers is nothing new for banks.But today they have to fulfil – from country tocountry – different requirements concerningtransparency, ie to know (at least) theultimate shareholders and to seek a personalrelationship with the management of theirborrowers. For example, in the past it wassufficient that a law firm (preparing the LOon the documentation) stated that the ID ofan ultimate shareholder or CFO of a borrowerhad been presented. Today, it is morecommon that the bank has to do that itself.
So it will continue to create hugecomplexity for banks, running expensive andmore intense procedures of operationalregulation safely, be it the fulfilment of legalrequirements in the country of an ECA, PRI,or be it the country in which a transaction isbooked or the borrower is located.
Needless to say, sanctions are anadditional layer of such operationallegislation. I’m confident that most ECAsalready have a fundamental understanding of
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Whatever compromise will be agreed at the OECD level,banks may decide that it is better to stay out of coalprojects – even if ‘allowed’ by the OECD – to be on thesafe side.
operational regulation, even if it is oftenbased on discussions with banks. But Isometimes put the following question toECAs: “How do you react as an ECA if a bankis approaching you in year three of a buyer’scredit to let you know that thebuyer/borrower has to be immediately exiteddue to KYC (legal!) reasons – even if it hasbeen repaying his debts properly? Would yoube prepared to agree that the bank shouldseek immediate repayment, even if it couldresult in a default?”
‘Soft’ regulation – sustainability andcorporate social responsibilityThere is growing significance around thesustainable trade agenda too. Its roots are inthe Western European environmentalmovement and in the voluntary charitableactivities in the US, but sustainability today issetting restrictions on export finance. Thereare several well-known initiatives with banksinvolved that have implemented anddeveloped sustainability standards, such asthe Equator Principles (EP) or the ThunGroup.
Contrary to the regulatory environmentdescribed above, social standards are moreoften formed and set by public opinion or theNGO community, and not by the jurisdiction.Nevertheless such standards are today seenas the next level of ‘soft’ regulation – havingan immediate and efficient impact on banks’activities. It is also obvious that the 80, or so,EP banks are setting the standard, but thereare still more than 4,500 banks in Europewho often could do more.
The 2015 review of the CommonApproaches will further set out social andenvironmental standards for publicly-supported ECAs, and is likely to focus moreon human rights. The debate on the futuresupport of coal-fired power plants is alsoimpacting on business cases in variouscountries, reducing predictability for
project developers, who usually need three-five years – sometimes more – toacquire all licenses and approvals for a newpower plant. Whatever compromise will beagreed at the OECD level, banks may decidethat it is better to stay out of coal projects –even if ‘allowed’ by the OECD – to be on thesafe side.
Nowadays, databases such as Rep Risk orUNEP FI may help to manage reputationalrisks in banks but the preparedness tosupport trade and export finance in sensitiveareas is dependent on the ambition of a bankto be seen as a well-governed entity.
The unintended consequences ofregulation and what could be doneRisk mitigation instruments are still needed.Today, banks have to deal with volatilecurrency-exchange rates, low interest rates inWestern Europe and the US, China’sslowdown and the political crisis in Ukraine. Inthese turbulent times, it is often not easy todiscern which aspects of regulation have areal negative impact on trade and exportfinance.
Here is an attempt to summarise some ofthe findings of the EBF’s Export Credit WG:
a.) ECA-covered export finance is evenless favourably treated than other tradefinance instruments;
b.) decision-making procedures in banksneed more time and are less predictablebecause of frequent changes in regulation;
c.) increasing costs for export financingsolutions – especially smaller transactions –are becoming more and more expensive,which is particularly negative for SMEs;
d.) proper on-boarding (KYC, AML) forbanks and corporates worldwide requiresinternational networks and presence, andmay lead to a concentration of export financebanks;
e.) despite Quantitative Easing,refinancing solutions are still needed to be
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Advocating in favour of a decent adjustment ofregulation - mainly to lower the negative impact of theleverage ratio - should be a joint effort of banks, ECAs,PRIs and exporters. But also international organisations& initiatives (Berne Union, ICC, BIAC, BAFT, and EBF)should team up to discuss visions, standards andactivities for the export finance industry.
maintained to fulfil the Liquidity CoverageRatio/Net Stable Funding Ratio;
f.) consistency of ECA policies, generalconditions, legal settings and products –lacking so far – is key to reducing complexityand costs;
g.) further standardisation ofdocumentation is necessary.
At the moment it seems that no singleregulatory measure is the final nail in thecoffin for export finance, but it may turn outthat sooner or later the sum of all regulationwill reduce participants and capacity.
In light of the above, it would be helpful forbig data to arrive in export finance to helpdemonstrate market movements andchanges. The ICC MLT trade register is, in themeantime, a valuable report on defaults andprovides evidence on the low-risk profile ofECA-covered loans. Tagmydeals started lastyear to publish reports with remarkable real-time data. The Berne Union – having the mostpowerful database on export finance – could
also play an important role in showing trendsand movements. But, in order to do this, thedata may have to be further reviewed andcategorised.
It will also be of utmost importance toexplain to policymakers and regulators themechanisms of MLT export finance and itspositive effects on employment in Europe.The following word map illustrates that,within speeches by the EU Commissioner forTrade, key words such as ‘trade’, or ‘exportfinance’ have received very little emphasis(source EBF).
Advocating in favour of a decentadjustment of regulation – mainly to lowerthe negative impact of the leverage ratio –should be a joint effort by banks, ECAs, PRIsand exporters. But also internationalorganisations and initiatives (Berne Union,ICC, BIAC, BAFT, and EBF) should team up todiscuss visions, standards and activities forthe export finance industry.
We are all on the same learning curve. ■
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Missing tradeA word map of recent speeches by the EU Commissioner for Trade showing how key words such as ‘trade’, and ‘exportfinance’ have received very little emphasis (source EBF).
Export credit agencies (ECAs) continue tobreak new frontiers, backing loans to newindustries such as renewable energy in thePhilippines and supporting deals in sectorsand markets, such as Russia, wherecommercial banks and private insurers mightotherwise shy away from.
Safe house in a crisisSomething that unites big borrowers is theirappreciation of ECA finance, especiallyduring difficult periods. “When times gettough you can count on ECAs,” notes Ceyhun(Jay) Cetin, assistant treasurer at UStelecoms company Sprint. “In down times,when markets are freezing or the economy’sslowing down, ECAs are still there. They arestill providing financing when others are notor are charging much more.”
When Sprint arranged, in 2012, its firsttransaction backed by an ECA other thanExport Development Canada (EDC), high-yield markets in the US were frozen. Althoughthe company could probably still havetapped funding, it would have beenchallenging and much more expensivewithout the “halo effect” of Sweden’s EKN, hesays.
That $1 billion credit agreement wasfollowed this January with a combined $1.8billion of vendor financing via three separatetransactions backed by Finland’s Finnvera,South Korea’s K-sure and Belgium’sDelcredere/Ducroire (D/D).
Having an ECA on board gives a level ofcomfort to other creditors that goes beyondits simple guarantee, says Cetin. “Banks andbond investors know there’s another set of
eyes looking at ourperformance,projections andcompliance.” From acorporate treasuryperspective, ECAfinance also providesimportantdiversification.
The fact that ECAshave continued toback the rightborrowers in Russiadespite challengessuch as sanctions,market turbulenceand corporates’ morecautious investmentplans is testament totheir staying power,says Ilya Krasnov,head of corporatefinance at Russia’sMetalloinvest.
The Russian steeland mining companyhas arranged twoECA-backed dealsover the past 18months. In April 2014,it closed a €34 million($38 million)transaction backed byGermany’s Euler
Hermes to fund the import of equipmentfrom Linde.
That was followed in early June this yearby a €267million ($298.7 million) dual-ECA
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Achieving the otherwiseunachievable: what ECAsmean to big borrowers Helen Castell at TXF talks to some of the world’s largest borrowers aboutwhat ECA finance means to them, and why things like fixed-rate financing,long-term framework arrangements and looser eligible content requirementsare top of their wish list.
Jay Cetin
Antje Gibson
Ilya Krasnov
agreement bringing together UK ExportFinance, Austria’s OeKB and a club ofinternational banks. Proceeds from the 10-year loans will be used to finance thepurchase of equipment from PrimetalsTechnologies and technology from Midrex UKthat were used in the construction of a thirdhot briquetted iron plant (HBI-3) atMetalloinvest’s Lebedinsky GOK plant.
Longer tenors attract borrowersFor Royal Caribbean Cruises, which relies onECA finance to build cruise ships, one keyattraction is the long tenors available,according to Antje Gibson, vice president andtreasurer.
There is typically a three- to five-year leadtime between ordering a ship and delivery.Although about 80% of a vessel’s roughly$1billion price tag is paid at delivery, RoyalCaribbean needed at the time of ordering tosecure financing commitments for a loan thatideally ran for 12-years.
“In the commercial bank market, theyreally can’t make commitments that are threeto five years long and then have a financingthat goes out 12 years unless they have thatECA support,” she says. “It is critical, at leastin today’s marketplace, to know we have thatavailable to us.”
ECA financing accounts for around 50% ofRoyal Caribbean’s debt balance. Its vesselsare made in France, Finland and Germany, soit has worked with Coface, Finnvera and EulerHermes. “They’ve all been very good to workwith and we’ve found them generally verycompetitive in their offerings,” says Gibson.“We have found them to be creative whenneeded, which is very helpful.”
In another sector – renewable energy –support from Denmark’s EKF allowed thePhilippines’ Energy Development Corp toachieve a 15-year tenor on financing for itsBurgos Wind Project – both for the US dollar-covered and the US dollar-uncoveredportions. Without ECA backing, foreign banksare typically prepared to lend for no longerthan five years in the Philippines, notes ErwinAvante, vice president of corporate finance.
Commissioned in November 2014, Burgos
was the first wind project in the Philippines tobe backed by an ECA and financed byinternational banks at a longer tenor, despiteuncertainties around the country’s new feed-in-tariff regime, he notes. “It was thereforeconsidered a milestone.”
Given the capital-intensive nature ofrenewable energy, as well as single borrowerlimits imposed on local banks, the use of ECAfinancing to fund such projects will increase,Avante predicts.
Energy Development Corp was alsoimpressed in its first ECA transaction byEKF’s overall flexibility and the fact thatfinancing was completed within just sixmonths of formal discussions starting. “Wedidn’t have any major issue with EKF thatwasn’t resolved,” he says. “Both parties werereasonable as far as the risk allocation isconcerned.”
ECA financing still the cheapestECA-covered funding remains “one of thecheapest available sources” of finance formany of Russia’s biggest corporates, saysMetalloinvest’s Krasnov. As such, for anycapital-intensive project with an internationalcomponent, an investigation into whetherECA financing is available is a key part ofeconomic feasibility studies. On rareoccasions – for example during turbulenttimes when corporates are more cautiousabout investing – the availability or not ofECA funding can be make or break for aproject.
“One can hardly over-estimate theimportance of this support,” he says, notingthat even in good times the low cost of ECAfinancing helps corporates free up cash flowsand optimise debt portfolio parameters.
Something that a number of corporatesinterviewed would like to see is more fixed-rate financing, as offered by Spain’s FIEM andUS Ex-Im Bank – although the latter, becauseof non-reauthorisation by US politicians iscurrently redundant to providing USexporters with any new loans or guarantees.
“Combining ECA finance with a bondwould be very interesting,” for RoyalCaribbean Cruises, says Gibson. One major
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Combining ECA finance with a bond would be veryinteresting – Antje Gibson, Royal Caribbean Cruises
obstacle however is that due to the nature ofship-building, the company typically needs afinancing commitment of three to five yearsbefore the funding for a new vessel isreleased.
Because this would be impossible with abond, “you’d have to raise the funds ahead oftime, which would create a lot of negativecarry” over that period, she says. “So far,going down that route hasn’t proven to beviable, but we would love to see if somehowsomething could be worked out in thefuture.”
Although the shutdown of US Ex-Im Bank“will have little to no bearing” on RoyalCaribbean Cruises, which builds in Europeand mostly sources from European suppliers,“if we saw other governments move in thedirection of eliminating export credit finance,that would be quite a concern for us,” sheadds.
Long-term framework deals wouldlower costsOne way ECAs could improve their offering isby helping enable a kind of framework ECAfinance agreement that would need to benegotiated once a year at most, saysMetalloinvest’s Krasnov.
Allowing corporates to tap ECA supportfor a pre-agreed number of suppliers underpre-agreed conditions would createeconomies of scale for corporates and reducesome of the hidden costs associated withECA financing, such as the man-hoursinvolved in arranging individual transactions.
Although ECA financing is much cheaperon paper than commercial financing, thesecosts can occasionally erode some of thatprice advantage, he notes.
“It just needs to be packaged in a solution,”he says. “I think it’s quite do-able and justneeds some effort from all the relevantparties – mainly from banks but also fromcorporates, and from ECAs in terms of beingable to support such types of commitment.”
Sprint has achieved a similar effectthrough its own negotiations with ECAs.
In the four non-EDC agency financings
that the company has tapped so far, thecompany managed to get all the ECAs toagree to work off the same base documents.
In its first transaction, Sprint told EKN thatits intent was to follow the same format withall its ECA financings “even though at thetime there wasn’t any other,” Cetin says. For
this reason, it was also firm in terms of whichcovenants it was or wasn’t prepared toinclude and why.
With the following three transactions, “westayed true to our word,” telling Finnvera, K-sure and D/D that it wanted them to adhereto the terms in the document agreedpreviously with EKN while making clear thatno other ECA was receiving more favourabletreatment, he says.
“Surprisingly, once we explained that andthey got comfortable, everything went reallysmoothly.” This was partly down to “ourmutual dialogue” and being an “open book”with them, he believes.
The fact that all three transactionsoccurred simultaneously made achieving thisdegree of standardisation especiallyimportant to Sprint. “We were afraid thateach document would be unique – it wouldbe very complicated to structure, executeand monitor.”
Working from a pre-agreed framework hasalready saved considerable time – andtherefore money – for Sprint and should
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Berne Union 2015: Borrowers and ECA financing
As financings become bigger and involve an ever widerpool of suppliers, multisource, multi-ECA transactionsare becoming more common. They are also becomingeasier to execute.
We’d like to see ourrelationship with Sinosure continue on amore formal basis – Jay Cetin, Sprint
continue to provide efficiencies in the future,says Cetin.
More flexibility over OECDguidelines pleaseAlthough corporates say most ECAs try to beas flexible as possible while adhering to theOECD Consensus, differences remain in howthey interpret it.
The European ECAs that Sprint hasworked with viewed it “as a kind of rulebook,” according to Cetin. “When we askedthem for some flexibility on tranchestructuring and payment timings and such,they said ‘No, we must comply with these.’”
In contrast, although K-sure was more“granular” in its credit due diligence, itinterpreted the Consensus as a set ofguidelines rather than rules.
“For some logistical issues, process issues,how to structure the tranches and how tomake it operationalise, they were actuallymuch more accommodating than theEuropean ECAs,” he says. “That willingness towork with us once they really gotcomfortable with the credit story and the duediligence, in terms of what we trying toaccomplish, how their vendors wereintegrated with us and helping us succeed – itwas definitely notable.”
In 2010, Sprint also held informal talks withChina’s Sinosure – an ECA that is not boundby OECD guidelines and which indicated itwas “very willing to help us,” Cetin says.Although discussions did not at that timeprogress beyond talking through terms andtrade execution, “we’d like to see thatrelationship continue on a more formal basis”.
One “major improvement” that EnergyDevelopment Corp would have liked to see inits Burgos financing is more flexibility in howOECD guidelines on pricing are interpreted.Total pricing for the US dollar coveredtranche, including margin plus guarantee fee,ended up slightly higher than for the USdollar uncovered tranche, Avante says.However: “In the end it was acceptablebecause the total financing package wasattractive to both the banks and thesponsors.”
Eligible content still a sticking pointGreater flexibility over what constituteseligible content – and specifically allowing higher local content – would attractmore corporates to ECA financing andencourage them to seek bigger facilities,corporates say.
French ECA Coface’s stipulation, forexample, that manufacturing must be done inFrance meant that Sprint could not seek itssupport for a transaction with Alcatel-Lucent(ALU), despite its French heritage, says Cetin.“We would love to work with [Coface] but wecouldn’t because of the way they interpretwhat the eligible content is.”
Some corporates would simply like to seeECAs extend bigger guarantees.
Because most of the payment for a cruiseship is made at the time of delivery, theexporter has to finance the majority of thevessel’s construction. Royal Caribbean wouldtherefore like to see ECAs expand the level ofguarantee they offer exporters beyond 80%.
Although ECAs do already offer goodsupport to exporters, “the higher the levels ofthe guarantee, the easier and cheaper it is toget financing,” notes Gibson.
Multi-ECA transactions pick up speedAt the same time, there are many ways inwhich ECAs are changing for the better – notleast the way they communicate with eachother – corporates say. As financings becomebigger and involve an ever wider pool ofsuppliers, multisource, multi-ECA transactionsare becoming more common. They are alsobecoming easier to execute.
Although ECA financings are alwaysslightly slower than standard bilateral loans orcertain structured secured financings,Metalloinvest’s experience with structured,multi-participant transactions meant that thisyear’s dual-ECA transaction was relativelystraightforward, says Krasnov.
The fact that UK Export Finance tookdocumentation risk meant that negotiationstook slightly longer with this ECA than withOEKB he says, but “I would not say that itwas something that was an issue or thatcreated bottlenecks.” ■
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Berne Union 2015: Borrowers and ECA financing
Although ECA financing is much cheaper on paper thancommercial financing, the time it takes to arrangetransactions can erode some of that price advantage – Ilya Krasnov, Metalloinvest
As part of the 2015 Berne Union and PragueClub Spring Meeting held in Florence, Italy,and hosted by SACE, a CEO panel was heldto discuss members’ various perspectives onthe “future role and scale of export creditagencies (ECAs)”. Supporting the work of thepanel, a member pre-meeting questionnairewas circulated to all members, public andprivate alike, in order to explore the currentapproach of members and their respectiveguardian authorities. A total of 52 responseswere received, representing well over half ofBerne Union and Prague Club members.
In terms of the ECAs’ share in theirrespective national exports, responseshighlighted that as of Spring 2015 more thanhalf cover less than 5% of their country’sexports and only seven of the respondentsindicated a higher support rate in nationalexports. Most ECAs reported that their roleand mandate are defined in statutory form,limiting their mandate to expanding exports,job creation and other national interests, orfilling financial gaps (if any) and levelling theplaying field. Unexpectedly, 8% of the surveyparticipants replied that their organisationsdo not have a restrictive mandate at all.
The reasoning for the existence of ECAshas been a controversially discussed topic fora very long time depending on the prevailingpolitical winds. This was reflected by 15members who noticed dormant to significantpolitical dynamics to reduce governmentinvolvement in perceived commercial activity(such as ECA business), a sentiment shared
across all majorregions. Thissomewhat confirmsthe global trends ofdeepening regulationson state aid andongoing pressure ongovernments to cutexpenses and non-essential services.
The mostfundamental and practical constraints ofECAs to enhance support and increasemarket share lead back to the legalframework, as the vast majority of theinstitutions are prohibited from providingsupport where private sector cover isavailable. Furthermore, due to the restrictionson state budgets, members generally haveoverall financial caps on their activity asdefined in their concerning acts.
The session’s debate in Florence alsohighlighted that most of the ECAs have beenestablished during pivotal periods, eitherduring or after political and /or financialupheavals (e.g. the 1920s and 1930s) or toaddress market gaps as during the early1990s in Eastern Europe. Most members’activities and new underwriting figurescontinue to peak during times of crises,reflecting that this market gap mechanismcan flexibly respond to the demand side as acounter-cyclical trade policy instrument.
Looking forward to 2020, all, except threeECAs forecasted an increasing need for cover
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The future role andscale of ECAsBy Laszlo Varnai, assistant director, Berne Union
Laszlo Varnai
Any substantiated commercial and academic analysis of the past has clearly demonstrated that there is a well-earned and justifiable niche for ECAs, successfullystepping up to complement the prevailing export supportcapacity from the private sector when needed.
and hence growing activities; five ECAs seetheir commitments growing by more than35%, well in excess of expected global tradegrowth. Respondents (public and private)unanimously see the main drivers for futureexpansion as clients’ demand and theexporting country’s export levels in the firstplace, followed by their organisationalcapacities and the development of financialregulations (e.g. Basel III). Amongpolicyholders and with respect to exporters’size, the small and medium-size exporter(SME) sector will require more and moreattention and commitment.
Exporters, importers and banks largelyprovide supportive feedback and look at theECAs as choice solution providers to supportsafe and sound trade and trade financestructures.
Even during times of increased politicaland market purist pressures or criticism,ECAs have proven to be adaptive bydeveloping new products and procedures.Yet, in most jurisdictions the publicperception of the ECA and thus the publicsupport for the ECA is closely linked to the
ECA’s capability to flexibly fulfil itsdesignated market gap role in closecooperation with the private sector.Inevitably, the future role and scale of ECAs,as well as the demarcation to andcollaboration with commercial risk-takers, willbe an ongoing topic of conversation for yearsto come. However, any substantiatedcommercial and academic analysis of thepast has clearly demonstrated that there is awell-earned and justifiable niche for ECAs,successfully stepping up to complement theprevailing export support capacity from theprivate sector when needed. ■
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Berne Union 2015
Does government have an overall mandate for your institution?
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Even during times ofincreased political andmarket purist pressures orcriticism, ECAs haveproven to be adaptive bydeveloping new productsand procedures.
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EKF, Denmark’s export credit agency, knowsfrom experience with small and medium-sized enterprises that they are an increasinglyimportant sector of the economy and that itis a sector worth the focused efforts of theagency.
Four out of five customers with EKF aresmall and medium-sized enterprises (SMEs).Since 2010, the number has more thandoubled. That is the fruit of five years offocused efforts on SMEs, according to Kim Richter, senior director of thedepartment for small and medium-sizedenterprises at EKF.
”Prior to the financial crisis, we had morefocus on guarantee volume. We servicedSMEs but had no specific focus on this clientgroup. After the crisis, there was a growingpolitical wish to support the SME sector, andwe formed a specific SME team. Today wesee the effect of our actions,” says Richter.
He points out three initiatives that pushedthis development; the establishment of anSME department, new products matching theneeds of SMEs and enhanced marketingtargeting this segment.
New department means swift andflexible processingIn 2010, EKF established a department
dedicated to SMEs.The differencebetween thisdepartment andEKF’s department forlarge corporates is theswift and flexibleprocessing. Thedepartment’scustomer servicepromise requires that
EKF responds to an enquiry within 24 hours.Furthermore, EKF can issue guarantees fromday to day. However, often EKF issues theguarantee after only a few hours.
This means that EKF has seen a largeinflux of small and medium-sized customers.It makes demands on EKF’s employeesrequiring a higher degree of generalist skillsrather than specialist skills. They must be ableto quickly familiarise themselves with newsectors and new countries and be able toadminister a large customer portfolio. On theother hand, they do not have to scrutiniseevery case.
However, EKF has eased some of the workpressure by delegating a lot of the work tothe banks. The banks conduct creditassessments of companies, and they canapply for working capital guarantees online.
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Berne Union 2015: SMEs and Denmarks’ EKF
EKF demonstrates astrong SME focusBy Maria Steffensen, senior communications consultant, EKF, Denmark’sexport credit agency
Maria Steffensen
Four out of five customers with EKF are small andmedium-sized enterprises (SMEs). Since 2010, thenumber has more than doubled. That is the fruit of fiveyears of focused efforts on small and medium-sizedenterprises.
Small guarantees are automatically issued tothe banks. This speeds up the process.
New products meet SMEs’ uncoveredneedsThe last five years have led to thedevelopment of three new products targetingthe needs of SMEs.
Firstly, EKF has established the SMVGuarantee, which is equivalent to the BuyerCredit Guarantee for large corporates. Theguarantee helps a foreign buyer obtainfinancing from a bank. EKF guarantees thebank. The difference is that thedocumentation burden has been lifted. Theprocess of approval has become easier, and itdoes not take an army of solicitors, whichmakes it suitable for small orders.
Secondly, EKF has established theWorking Capital Guarantee, providing Danishexporters – or Danish sub-suppliers to exportcompanies – access to financing. EKF stillguarantees the exporter’s bank, whichprovides the export company with credit or aguarantee. The Working Capital Guaranteewas established during the financial crisiswhen banks were reluctant to lend money.Today, the Working Capital Guarantee isEKF’s most popular product.
Thirdly, EKF’s most recent product is theCapital Expenditure Guarantee, which Danishcompanies can use to establish productionfacilities. The product has become popularbecause it makes it attractive to move jobs toDenmark when financing of machinery andbuildings is in place. The Capital ExpenditureGuarantee can also be used for productionfacilities abroad.
According to Richter, the reason for thegreat success of the products is that they areeasy to use and fill a gap in the privatemarket.
”We have focused on a lean applicationprocess, and on increased awareness in the banking sector. Furthermore, we fill amarket gap. Although lending appetite has
increased in the banking sector, it has not yet fully reached the SME sector,” says Richter.
Marketing increases awarenessIn parallel, EKF has intensified its marketing inrelation to the SME segment. EKF hasconducted a massive marketing campaignfocused on SMEs because it was necessary.EKF’s measurements show that in 2012, 60%of Danish SMEs did not know that EKFexisted.
At the beginning of the campaign, theobjective was to increase brand awareness.The challenge was to reach the companies,which are characterised by all being verydifferent. EKF helps cookie bakers, children'sclothes designers and nail manufacturers.Some companies have three employees;others have several hundred. Somecompanies export to near markets, others gofor Asia and South America. Some companiesare in big cities such as Copenhagen orAarhus, while others are located all over thecountry. And only a few of them knew EKFbeforehand.
”That is why we made TV adverts, fullpage adverts in national business newspapersand banner advertising,” says Richter. It hasbeen a great success. Now 90% of DanishSMEs know EKF, which is reflected in thebusiness. In 2014, EKF issued new guaranteesto SMEs worth almost €250 million ($279million). That is the highest exposure to dateand an increase of about 13% on the yearbefore.
“In our opinion, there is a vast untappedpotential, and that is why our ambition is tocontinue to grow at the same rate in thecoming years,” says Richter.
Calculations from Copenhagen Economics,the leading economic consultancy in theNordic region, show that EKF’s efforts secureDanish company orders worth €2.5 billion($2.79 billion) annually. It helps to create orretain 10,500 Danish jobs. ■
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We have focused on a lean application process, and onincreased awareness in the banking sector. Furthermore,we fill a market gap. Although lending appetite hasincreased in the banking sector, it has not yet fullyreached the SME sector.
Last year, the Berne Union provided anupdate on how its members have workedwith small and medium-sized exporters(SMEs) given their important roles insupporting national economies. Withcontinued attention and focus on SMEsworldwide, the Berne Union is pleased toshare current member feedback on whatchallenges face SMEs today, the progressmembers have made to date and thechallenges which continue to remain.
BackgroundIn an effort to better understand the growingneeds of SMEs, in May 2013 the Berne Union(BU) identified this as a priority segment forfurther research. Then president of the BerneUnion, Johan Schrijver (Atradius) recognisedthe increasing importance of SME businessesand asked the Berne Union ManagementCommittee and membership for their supportto establish a SME Working Group.
This initiative was well received and manymembers noted that supporting SMEbusiness was becoming a new priority fortheir organisations and increasingly ofcommon interest to export credit agencies(ECAs). Under the support of the currentBerne Union president, Daniel Riordan(Zurich), the SME Working Group, chaired byDan Mancuso (EDC), continues to championtheir work efforts in this space and engagethe broader membership. Under thepresident’s and chair’s leadership, memberengagement has extended to Prague Club
members as well (agroup of developingand maturing publicand private credit andexport insuranceagencies).
ProgressTo date, two SMEquestionnaires havebeen circulated (2013
and 2015) to all members (the secondwelcoming Prague Club member input), twospecialist meetings have been hosted (thesecond to take place after submission of thisoverview and to include Prague Clubmembers), a webinar and severalconversations have been held amongstmembers on best practices, how to overcomechallenges, etc. There are also ambitions todo even more in this space!
What is of key importance is the progressthat has been made between 2013 and today.Members continue to have a variety of SMEdefinitions in use as was the case in 2013. TheEuropean Union’s definition (‘less than 250full time employees, and turnover of €50million ($56 million) or less, or balance sheettotal of €43 million ($48 million) or less’) isonly used by 37% of respondents, indicatingthat 63% of respondents categorise SMEsdifferently (e.g. less than 500 employees;companies with a turnover of €150 million($168 million) or less, etc). In spite of thevariances, the questionnaire still solicited
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Berne Union 2015: SMEs and the Berne Union
SME support continues tobe a growing sector forBerne Union membersBy Abbey Sturrock, director, Berne Union
Abbey Sturrock
It is anticipated that in years to come SMEs will play aneven bigger role in the global marketplace, and theBerne Union is keen to continue to explore ways formembers to develop more effective and relevantstrategies to support this key business segment.
interesting feedback (see Figure 1).What can be gleaned from the results is
that the attention on SMEs is not fading butrather growing. Progress has been made bymany ECAs. More members are developing,maintaining and growing their supportschemes and building special teams toaddress this.
But key challenges are still ever-present.When members were asked what they saw asthe top challenges SMEs face, membersidentified the following in order of priority(see Figure 2).
Obtaining working capital, something thatwas not as prominently featured as achallenge in 2013, nearly tops the list ofchallenges in 2015. At first blush, this is likelydue to the fact that more members are nowinvolved in SME business and see this as akey SME challenge. During the 2015 SMESpecialist Meeting held in Prague, CzechRepublic (October 1 – 2, 2015), and hosted bythe local ECA, EGAP, this was considered andexplored. During this rendezvous, EGAP alsoshared its progress with respect to helpingSMEs access working capital through itsthree simplified product lines (pre-exportfinancing insurance, bank guaranteeinsurance and supplier credit insurance).
While members are in a position tosupport key areas of concern (access tofinancing), this comes much further along inthe execution of a SME’s business strategy,typically only after the company decides to
grow internationally. Complicated foreignregulations, the cost of doing business andunderstanding foreign opportunities remaintop of mind for many SMEs.
While members may not be able todirectly impact or influence some of theseissues, some have made great strides intrying to help SMEs understand marketopportunities. For instance, ExportDevelopment Canada is investing into aprogramme on how to connect SMEs toglobal procurement opportunities. The‘Central Connector’ system is an integratedsystem of tools, processes and data forsharing procurement opportunities andmarket knowledge with SMEs.
In spite of all of the progress that has beenmade, members have also emphasised thatchallenges remain for themselves. Toporganisational challenges include (see Figure 3).
Picking up on the issue of staffing, whilemany members have limited humanresources to support this segment, memberssuch as NEXI (Japan’s ECA) is currentlyleveraging various delivery channels in orderto overcome such HR constraints. NEXItypically partners with major banks, privateinsurance companies, governmental agenciesand regional banks in order to better serveSMEs in Japan. Regional banks, under theircooperation agreements, introduce NEXIproducts to their customers and customerscan submit applications through these banks.EKF has also invested in a bank ambassador
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Figure 1: Feedback from members
2013 2015
Percentage of respondents who have or are developing a SME support scheme 69% 89%
Percentage of respondents who support SMEs due to policy or mandate 75% 79%
Percentage of respondents who support SMEs through insurance support 95% 97%
Percentage of respondents who support SMEs through financing support 35% 44%
Percentage of respondents who support SMEs directly 60% 74%
Percentage of respondents who have special SME products (differences in process, coverage and risk appetite) 65% 71%
Percentage of respondents who have a special SME team 44% 57%
Figure 2: Top challenges faced by SMEs
2013 2015
1. Obtaining financing 1. Obtaining financing
2. Complicated foreign regulations 2. Obtaining working capital
3. Understanding market opportunities 3. Complicated foreign regulations
4. Willingness to take the risks 4. Cost of doing business abroad
5. Cost of doing business abroad 5. Understanding market opportunities
programme whereby training is delivered tobank account managers which also helpmarket EKF solutions.
Interestingly, the issue of financialsustainability, two years after the SME pushbegan at the Berne Union, has now made itsway onto the list as a top challenge orconcern. Making a meaningful difference toSMEs versus financial sustainability is aninternal debate which members continue tobattle with.
Linked somewhat to the identifiedorganisational challenges are the results forthe queries of top unaddressed SME needs.Respondents identified that there is still astrong lack of awareness of existing support.Approximately 90% of respondents flaggedthat SMEs are presently unaware of thesolutions and product offerings available inthe marketplace (see Figure 4).
While members have invested ininnovations and process improvements (e.g.Euler Hermes has invested in how to reducecomplexity associated with its whole turnoverproducts), there is still an underlying need toreach SMEs. Striking the most appropriatebalance between effective engagement andinnovation efforts will also continue to be a
challenge for many members as bothactivities require substantial time and drawsignificant resources.
It is anticipated that in years to come SMEswill play an even bigger role in the globalmarketplace, and the Berne Union is keen tocontinue to explore ways for members todevelop more effective and relevantstrategies to support this key businesssegment.
As a group, members will need to thinkcritically and creatively about where theywould like to be in 2017 (the anticipated nextdate for the next SME Questionnaire).Hopefully in two years from now, throughstrong member cooperation and focus on theissues, the challenges will diminish andsuccesses will abound. ■
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Berne Union 2015: SMEs and the Berne Union
Figure 3: Top organisational challenges
2013 2015
1. Marketing 1. Marketing
2. Automation of process 2. Automation of process
3. Information access 3. Cooperation of banks
4. Administrative burden 4. Information access
5. Attracting private banks 5. Attracting private banks
6. Cooperation of banks 6. Staffing
7. Staffing 7. Sustainability
Figure 4: Top unaddressed SME needs
While members haveinvested in innovations andprocess improvements,there is still an underlyingneed to reach SMEs.
Annual business volumes of many insurersand banks are more often than not driven byproject finance and large corporate loantransactions. However, when looking at thenumber of transactions, a large proportion issmall-scale transactions of all tenors andoften through revolving trade financefacilities. In turn, most of these are generatedby small and medium-sized enterprises(SMEs), which often rely heavily on creditinsurance for managing both liquidity, as wellas risk, in their cross-border business.
SME is not always a clearly defined termbut would usually include companies havingfewer than 250 staff and €50 million ($56million) annual turnover on a consolidatedbasis. Because SMEs are an important part ofmany economies, we have seen a strongeffort by ECAs and other stakeholders inpublic and private institutions alike to makedoing business easier for them.
A vast array of products exists to providesupport. Yet SMEs often feel that they don'tseem to get what they need from banks,ECAs and from the insurance market. Giventhat volume per transaction is small, oft citedbalance sheet or capacity constraints ofbanks and insurers nor liquidity issues shouldbe used as an excuse. So what, in fact, seemto be the issues?
While many SMEs are frequently sellingoutside of their home jurisdiction, they don'tusually have a specialised resource withintheir finance department to deal with sales
financing and riskmitigation. Often, thismay be done by theCFOs themselves, inparticular if a deal is a'larger one', which in asmall enterprise couldeasily be a €1 million($1.1 million) piece ofequipment. So thefirst challenge is
awareness and transparency. Staying abreastof the developing and diverse product suiteof insurers and knowing what product(s) maybe available and on what terms takes effort.
Reaching out to this client group andfinding a regular and effective way tocommunicate proactively is key. This couldbe, for example, via industry associations orthrough ECA-organised workshops, ideallybringing together all participants (exporters,insurers, financiers) such as the ones hostedby Finnvera and EKF or (biannually) at EH, toname but a few. Some ECAs further engagevia a network of regional agents close to theclient, as many small businesses are reluctantto budget time and money for travelling, ifthey are not even clear about the specificbenefits to them.
Clearer processesA coherent product mix, together with clearand transparent product descriptions listingall major terms is essential, too. Deciphering
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Smoothing the wayfor SMEs withinexport financeBy Matthias Wietbrock, managing director of Northstar Europe
Matthias Wietbrock
A vast array of products exists to provide support. YetSMEs often feel that they don't seem to get what theyneed from banks, ECAs and from the insurance market.
the small print and understanding the oftenquite extensive terms and conditions and, inparticular, what is required in a claim scenariocan sometimes be an insider's art. SMEswould benefit from simplified terms andfewer, but clearly described and defined,obligations and conditions. Another examplehere is the exporter’s undertakings, whichseveral ECAs require for medium and long-term cover. Quite a few exporters havestepped back from transactions because theyfound the language daunting and could notevaluate the real risk arising from them.
Bank documents too need to be simpleand straightforward. They should not requirelegal training or an external lawyer tounderstand. Given the diverse jurisdiction(s)this is not an easy task, of course. Given theusually limited number of small transactionsthat an individual institution sees, a jointapproach across the industry may beworthwhile. Applications from the short-termtrade finance business show thatstandardisation is possible and bringsbenefits to all parties involved. This could alsobe a way to manage the documentation riskthat many insurers put back on the insured.This would help attracting further, non-traditional financiers to the field as well.
Once a suitable product has been found,predictability and speed is of the essencewhen financing and ECA cover is requested.
Small transactions are often turned aroundswiftly by exporters and, additionally, it is notunusual that the question of finance and riskmanagement only comes up late in dealdiscussions. This means that any delay ofmore than four to six weeks has a materialeffect on the perceived value of the product.In our daily practice we see turnaround timesvarying widely from two to three weeks up toas much as six months.
Now, many ECAs have come a long way tobe more flexible in accepting borrowers’ localaccounting standards and their risk profilewhen these deals land on their desk. Thistakes time. Also, information coming frombanks and exporters is not always ascomplete and concise as is required for asmooth review process. Yet, completion timesof more than a month for standard structuresare difficult to explain away.
Apart from the aforementionedstandardised documentation, a standardisedand simplified application, review anddecision process could improve the appeal ofthe product further. With digital bankingalready driving efficiencies in domesticbanking and plain vanilla trade finance, thereshould be ways to benefit from these toolsencompassing export finance as well.
With a view to investment cost, userrelevance, and monitoring, a mutualdevelopment approach by financiers,exporters and insurers, as well as acrossnational boundaries, seems to be a good wayto address the issues mentioned above. Thepartnership that Northstar has formed withODL and several ECAs, banks and exportersin Europe and North America is one step inthat direction. But as they say, there is alwaysroom for improvement. ■
*Matthias Wietbrock is the managing directorof Northstar Europe, a joint venture ofLuxembourg state institutions ODL and SNCIwith Northstar Trade Finance Inc. Northstar isa specialised provider of trade financesolutions, focused primarily on small andmedium-sized enterprises engaged ininternational trade.
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Berne Union 2015: Supporting SME transactions
Applications from the short-term trade finance businessshow that standardisation is possible and bringsbenefits to all parties involved. This could also be a wayto manage the documentation risk that many insurersput back on the insured.
With digital bankingalready driving efficienciesin domestic banking andplain vanilla trade finance,there should be ways tobenefit from these toolsencompassing exportfinance as well.
Northstar Trade Finance is a world-class provider of trade finance solutions, focused primarily on small and mediumenterprises engaged in international trade. Whether you require trade finance, or whether we can provide an effective, timely and competitive solution to your buyer or supplier, consider the advantages of dealing with a company that understands your unique situation in the international marketplace
Since our founding in Canada in 1994, we have remained focused on fundamentals of sound credit and risk management, effective and timely deal analysis and an unwavering commitment to support our clients under the most challenging market conditions. Our success in developing and maintaining strategic partnerships with financial institutions, export credit agencies and insurers and other major providers in the trade and export finance market, allows us to provide a highly effective blend of financing solutions to valued clients across the globe.
At Northstar Trade Finance, we have earned a reputation for excellence. Let s discuss how Northstar s unique approach to trade finance can support your success in international markets.
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Finland’s Export Guarantee Act was amendedin September 2014 to enable export creditagency (ECA) Finnvera to grant guaranteesalso to large companies in Finland for theirindustrial investments. Before this changeFinnvera had a mandate to finance investmentsof small and medium-sized (SME) companiesas a part of its SME agency mandate.
The new mandate is not restricted by thesize of the company and is specificallydesigned to help financing arrangements ofinvestments that promote and enhanceexports from Finland. Eligible investmentscan be factory investments, investments thatimprove process engineering orcompetitiveness of the company in questionand also projects that indirectly enhanceexports, such as investments in logistics andother areas of private infrastructure that helpimprove the operating prerequisites andcompetitiveness of export companies. Publicsector investments are not eligible.
Finnvera offers only guarantees fordomestic investments. Funding is providedby commercial banks. Finnvera’s policy is tocover up to 50% of the senior debt of theproject. In smaller investments or, ifequipment sourcing so requires, a highershare can be considered. Stemming from theEU State Aid Rules the maximum coverpercentage is 80%. Otherwise, OECDArrangement Rules are followed as far asfeasible for tenors, repayment profiles etc.Obviously, local cost rules do not apply.Pricing is market driven. A commercial bankdetermines the all-in price of the loan andFinnvera will take its share of all pricingcomponents.
Finnvera has had awide range ofproducts to helpdifferent kinds offinancing needs ofSMEs but has not,until now, been ableto offer support tothe domesticinvestments of largecompanies in Finland.
This has created a situation where a Finnishcompany could have a guarantee or financingsupport from a foreign ECA when sourcingthe equipment from abroad. However, if theywish to buy manufacturing equipment fromFinnish suppliers, Finnvera has not been ableto offer financing support to these purchases.As a result, Finnish capital goods producersmay have lost contracts to their foreigncompetitors or they may have been forced tosource abroad to get ECA support for theirdomestic clients.
This has changed now and Finnishequipment suppliers’ competitive positionhas strengthened in domestic investments.
The Act as it is written is quite broad andtherefore often requires case by caseconsideration to determine whichinvestments qualify to be financed under thisnew mandate. At the beginning the demandwas quite vivid, but has declined, reflecting aweak investment climate in Finland. Finnverahas closed a few financing arrangementsunder this new mandate but the number isless than ten. The project size varies a lot;from one million euros to more than onebillion euros.
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Berne Union 2015: ECA innovations – the Finnvera example
New mandates in Finland to enhanceexport-driven investmentsBy Topi Vesteri, deputy CEO, group chief credit officer, Finnvera, andSatu Savelainen, senior advisor, Finnvera
Topi Vesteri
New €1.2 billion bioproduct millThe largest and probably the most well-known project that Finnvera has participatedin with the financing arrangements under thenew mandate is Metsä Fibre’s newbioproduct mill in Äänekoski in centralFinland. This is the largest pulp millinvestment ever in the northern hemisphere.
The core of the investment is a new pulpmill producing annually 1.3 million tons ofsoftwood and hardwood pulp. The value ofthis investment is €1.2 billion ($1.34 billion).There are several facilities in the debtfinancing package in aggregate amount of€750 million. The Finnvera-covered loanlinked to equipment purchases from Finlandis €400 million. Other participants areEuropean Investment Bank, EKN and sixcommercial banks; Nordea, Danske Bank,DnB, Pohjola, SEB and Swedbank.
This project is a perfect example of thespirit of the new mandate. The bulk of theproduction of the mill will be exported; it willincrease the value of exports from Finland by€500 million annually. The project also has avery positive impact on employment inFinland. This investment will create after itscompletion 1,500 new jobs in the whole valuechain; particularly in forestry and logistics. Inaddition, the construction period will offer6,000 man-years of work.
Furthermore, this investment will increasethe share of renewable energy produced inFinland by 2%. The mill generates surplusbiomass electricity which it sells to thenational grid. Overall, 70% of the equipmentis sourced from Finland. The increase inemployment, as well as the overall positiveimpact on Finnish economy, is an importantconsideration to Finnvera when evaluatingthe proposed projects and their eligibility forFinnvera support.
First mid-cap bond subscribedAlmost at the same time as the amendmentto the Export Guarantee Act, Finnverareceived an authorisation to subscribe bondsissued by Finnish companies whose turnoveris less than €300 million at the consolidatedgroup level. Until the beginning of the year2015, Finnvera had been able to subscribebonds issued by SMEs only. With this newextension the idea is to help to create amarket for bonds issued by mid-sizedcompanies, and hence widen their financingoptions. Finnvera’s mandate is to finance newinvestments with the bond subscriptions andnot to refinance existing bank debt.
The maximum investment is 50% of thevalue of the new bond issue, althoughFinnvera’s preference is to have a less significantshare. As an anchor investor, Finnvera facilitatesthe selling of the bond. Finnvera’s approachhere is to be one of the market players and totake the price that is determined by the otherinvestors in the market.
Furthermore, should the bond beoversubscribed, the share of Finnvera mustbe reduced proportionally when allocatingbonds to investors. The aggregate share ofFinnish public entities must never account formore than 50% of the bond value due to theState Aid Rules with which Finnvera mustalso comply in these transactions.
Finnvera’s first mid-cap bond subscriptionwas made in March 2015 when Finnverasubscribed a notable share of the bond issuedby Kotkamills Group Oy. The money wasraised for the conversion of a paper machineto produce packaging board to, amongothers, the food industry. The total investmentis over €100 million. The bond issuance waslinked to the acquisition where Kotkamills Oywas returned to full Finnish ownership. MB Funds, a Finnish private equity firm,acquired the majority of the shares inKotkamills Oy from a global private equity firm.
With this new investment the future of thecompany is more secure, as the product ofthe old paper machine was losing itsprofitability. For Finnvera, this was an idealcase for the bond subscription as the moneywill be spent to create something new which will increase exports from Finland andsecure jobs in Kotka in the south-east ofFinland. Finnvera’s co-investors are non-bank institutional investors such aspension funds. ■
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Berne Union 2015: ECA innovations – the Finnvera example
ECA: Euler Hermes Aktiengesellschaft
Borrower: PCC Bakki Silicon hf.
Deal volume: $300m
Deal type: ECA-backed guarantee
Industry: Metals and Mining
Country: Iceland
Financial Close: 11/06/2015
PCC Bakki SiliconECA-Backed Loan
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ECA: Finnvera
Borrower: Tui Cruises
Deal volume: $1.06bn
Deal type: Project and Infrastructure Finance
Industry: Shipping
Country: Germany
Financial Close: 30/06/2015
Tui CruisesECA-backed loan
MSC Mediterranean Shipping CompanyECA-backed loan
ECA: SACE
Borrower: MSC Mediterranean Shipping Company
Deal volume: $1.07bn
Deal type: Export and Agency Finance
Industry: Transport
Country: Switzerland
Financial Close: 18/06/2015
throughout EuropeTop 5 agency-backed deals
ECA: GIEKGarantiinstituttet for eksportkreditt
Borrower: Seadrill
Deal volume: $950m
Deal type: Project and Infrastructure Finance
Industry: Oil and Gas
Country: United Kingdom
Financial Close: 27/01/2015
SeadrillECA-backed loan
Fomento de Construcciones y Contratas (FCC)- ECA-backed guarantee
ECA: CESCE Credit Insurance
Borrower: Fomento de Construcciones y Contratas
Deal volume: $473.48m
Deal type: Export and Agency Finance
Industry: Infrastructure
Country: Spain
Financial Close: 25/05/2015
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China’s official export credit insuranceagency, China Export & Credit InsuranceCorporation (Sinosure), has achievedconsiderable success since it was founded in 2001.
Since 2009 Sinosure has increased thetotal volume of its cover annually by 30.7%,and its accumulated total coverage nowstands at $1.75 trillion. The company hasdeveloped in leaps and bounds, particularly inthe last six years. By the end of 2014,Sinosure’s business volumes were 7.1 timeshigher than 2008 with a total value of$445.58 billion, consisting of $25.45 billion ofmedium- and long-term export creditinsurance, $36.1 billion of investmentinsurance and $344.82 billion of short-termexport credit insurance. Since 2010, Sinosurehas consistently ranked top among globalECAs by the amount of its cover.
The rapid development of Sinosure is dueto its prompt response to the internationalfinancial crisis and its ability to seizeopportunities. Export credit insuranceperforms an important counter-cyclical role.The firm has taken an active approach andembraced the wider trend of increasedexport credit insurance demand.
In the meantime, we profit from our keyvalues of ‘reformation, innovation anddevelopment’. Based on the experiencelearned from our international counterparts,Sinosure endeavors to explore new routesand new initiatives for development, forminga path that is in accordance with internationalpractices and conforms to the domesticsituation of China with Chinesecharacteristics.
We can best summarise our experiencesunder the following principles:
First, to operate our business andservices according to market lawsSinosure advocates the business concept of‘following the guidance of policy, respecting
the discipline ofmarket and focusingon the need ofcustomers’. Wecoordinate andallocate the resourcesin accordance withthe need of ourcustomers. Meanwhile,we intensively explorethe potential of
emerging markets, and emerging industrieswith strategic importance, trade in servicesand small and micro businesses. Whileassisting national development strategies andsupporting China’s foreign trade, Sinosure hasalso prudently expanded its business and hasrealised its break-even target and achieved aminor profit.
Second, to deepen reform andinnovationSinosure has reformed the structure of thefirm, based on legal-entity corporategovernance, to form an efficient operatingsystem including a board of directors, asupervisory committee and effectivemanagement administration. At the sametime, Sinosure is actively innovating itsproducts and services, business proceduresand organisational structure. Moreover, it isattaching more attention to the experience ofcustomers to better cater for their demands.
Third, to control risks carefullyOur risk controls represent one of the corecompetitive advantages of Sinosure. Inaccordance with the principle of ‘reflectingpolicies, following procedures and benefitingdevelopment’, the company comprehensivelypromotes the improvement of its risk controlsystems. Through improving regulations andbetter internal management, Sinosure isenhancing its risk control capabilitiessuccessfully. By implementing robust risk
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Berne Union 2015: Sinosure embraces innovation to foster growth
Sinosure readies forfurther developmentSinosure's chairman, Wang Yi, describes how the world’s largest ECA haschanged both procedures and structure as it undergoes rapid growth.
Wang Yi
controls the firm has been able to maintain itshigh speed level of development whileminimising risks.
Nowadays, Sinosure stands at a newbeginning for development as the largestofficial ECA. Its service network and businesssystems have been continuously improved.With improved capability, the scope ofSinosure’s services keeps expanding.Currently, Sinosure has 2,550 employees and28 operating agencies throughout China.Meanwhile, it opened a representative officein London and sent working teams to Russia,Brazil, South Africa and Dubai. Its servicesinclude medium- and long-term export creditinsurance, overseas investment insurance,short-term export credit insurance, domesticcredit insurance, guarantee and reinsuringservice related to export. It also providesservice for consultation for receivableaccounts management, debt recovery &collection and other business related toexport credit insurance. The firm alsomanages insurance assets and conductsother services.
Sinosure is faced with new opportunitiesand challenges. Against the backdrop ofeconomic globalisation, China remains in animportant period of strategic opportunities asit implements its ‘go global’ and ‘one belt andone road’ initiatives. At this new startingpoint, Sinosure will embrace challenges,initiate new proposals and pursue newheights. Our strategic goals are, based on ourscale advantage, to shift from ‘being large’ to‘being strong’. The goal is to construct theworld’s leading export credit insurance firmwith optimum function, advanced technology,high-quality service, scientific managementand rigorous internal control. This is to ensurethe ECA operates safely and plays animportant role as an agency that drives andimplements better policies.
Driven by reformation and innovation,Sinosure will keep improving its operationsystem, enhance the management ability and
strengthen the capability of foreign tradeservice. We will grasp the historic opportunityof the ‘one belt and one road’ initiative,stabilising the development of export creditinsurance and earnestly improving ourbusiness of medium- and long-term exportcredit insurance, overseas investmentinsurance and the service for short-termspecific insurance. We will proactively adaptour management to the changes of moderntime, improving and completing ourmanagement system and nurture force thatdrives the reformation of the company.
Sinosure attaches high focus on itscommunication and cooperation with itscounterparts. After its accession to the BerneUnion in 2001, it has actively engaged in itsactivity and management. Sinosure hassigned cooperation contracts with 29 of themember companies and established annualor non-scheduled communication systemwith many of them.
Moreover, it builds reinsuring relations withmany agencies. At this new developmentstage, Sinosure will dedicate itself more tothe affairs of the Berne Union and facilitatecommunication with its counterparts topromote development. Especially at thishistoric moment with China’s proposedstrategy of the ‘one belt and one road’initiative, Sinosure is willing to make progresstogether with its counterparts, to deepen itscommunication and cooperation and torealise mutual prosperity.
This November, the 2015 BerneUnion/Prague Club Annual General Meetingswill be held in Shanghai. We expect to gatherwith all of our peers to discuss importanttopics in relation to the development of theexport credit insurance industry and theBerne Union. By doing so, we expect to pushexport credit insurance towards a betterfuture, hand-in-hand with our Berne Unioncolleagues, and to make a greatercontribution towards the development ofworld trade and the global economy. ■
62
Berne Union 2015: Sinosure embraces innovation to foster growth
Our strategic goals are, based on our scale advantage,to shift from ‘being large’ to ‘being strong’. The goal isto construct the world’s leading export credit insurancefirm with optimum function, advanced technology, high-quality service, scientific management andrigorous internal control.
Landesbank Baden-Württemberg
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Due to its long-term experience, its expert knowledge and its
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Globe
Inventor: Martin Behaim
Germany, 1492
The UK government aims to help makeLondon the leading centre for offshorerenminbi (RMB) business outside China, notleast because the currency has nowovertaken the euro as the second biggesttrade finance currency after the dollar.
Against this backdrop, the UK Chancellor,George Osborne, announced in June 2014that UK Export Finance (UKEF) would bewilling to provide guarantees for exporttransactions denominated in RMB.
The first exporter to benefit was Airbus,which supports 100,000 jobs in the UK. WithUKEF’s help their Chinese customer, theairline China Southern, was able to accessfrom HSBC a 12-year UKEF-guaranteed loanin RMB, which the airline used to purchase anew A330 aircraft. This was attractive for theairline as 97% of its revenues are in RMB.
The key feature of offshore RMB, unlike theonshore currency, is that it is fully convertiblein the international markets. There are norestrictions on who can access it, interestrates and exchange rates are fully liberalisedand the currency is fully fungible in offshorecentres, with no restrictions on flows betweenthose centres.
There is no risk forUKEF arising fromany disparity betweenthe two forms ofRMB, since the loanguaranteed was madeby HSBC Hong Kongfrom the Hong Kongmarket, entirely inoffshore RMB (ECAscannot currentlyguarantee theonshore RMB).
There is still aresidual convertibilityrisk from sterlingsince the offshoreRMB remains partiallydependent on thePeople’s Bank ofChina for liquidity.However, given the
moves that China has made tointernationalise its currency, and its ambition to make the RMB a leadinginternational trade and reserve currency, thisrisk seems low.
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Berne Union 2015: Renminbi support
A UK first in offshoreRMB fundingBy Paul Walsh, aerospace underwriting manager and Hannah Steadman,aerospace underwriter at UK Export Finance
Paul Walsh
Hannah Steadman
From the Chinese buyer’s perspective, offshore andonshore RMB are exchangeable at par – so even thoughthe bulk of China Southern’s revenues are in onshoreRMB, they derive the full foreign exchange benefit fromthe offshore RMB loan.
And critically, from the Chinese buyer’sperspective, offshore and onshore RMB areexchangeable at par – so even though thebulk of China Southern’s revenues are inonshore RMB, they derive the full foreignexchange benefit from the offshore RMBloan.
In this, the offshore RMB simply joinsUKEF’s portfolio of local currenciessupported. We have already providedsupport for export transactions in Thai baht,Japanese yen and Malaysian ringgit, forexample. In all, we already support more than10 currencies and we always welcome newideas from our customers and their banks towiden the list. These currency options help toinsulate buyers who receive a significantproportion of their revenues in their owncurrency from foreign exchange risk. Using a
local currency creates a natural hedge for theborrower.
Nevertheless, it took a lot of work insideUKEF, with support from HM Treasury, theBank of England and our partner exportcredit agencies, to get to the point whereUKEF could support an RMB transaction. Weneeded to consider how the currency wouldwork with our guarantee and the length ofthe financing, which broke new ground ininternational funding in RMB. In all this wealso worked with reinsurance partners Cofaceand Euler Hermes AG.
This work has opened the door to futureexport business being supported by UKEF inRMB. The flexibility on the loan currency willhelp make it more attractive for Chinesecompanies from any sector, and companiesoutside of China that generate revenues inRMB, to buy from companies operating in the UK.
Announcing the support for Airbus andChina Southern, the Chancellor reflected thescale of this new opportunity. He said: “This isa truly historic deal which paves the way forthe best British companies to export muchmore easily to the Chinese market. The UK isa world leader in financial innovation and I amdetermined that we become a centre for RMBbusiness so that many more of our brilliantexporters can benefit.” ■
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The key feature of offshore RMB, unlike the onshore currency, is that it is fully convertible in theinternational markets. There are no restrictions on who can access it, interest rates and exchange rates arefully liberalised and the currency is fully fungible inoffshore centres, with no restrictions on flows betweenthose centres.
This work has opened thedoor to future exportbusiness being supportedby UKEF in RMB. Theflexibility on the loancurrency will help make itmore attractive forChinese companies fromany sector, and companiesoutside of China thatgenerate revenues in RMB,to buy from companiesoperating in the UK.
Asia is the world’s workshop and it has alsoemerged as the engine of growth in globaltrade, eclipsing Europe. Asia is now thecentre of global expansion, driving tradegrowth in developed economies and in otheremerging markets. Intra-regional trade in Asia is expected to surpass that of Europe by 2016.
Initial growth of trade in Asia wascommodity-centric, mainly in minerals andfuels. However, of late, the emergingeconomies are moving away from this trendand developing their internal economies withcommodities declining in the share ofexports. The leading exporters like Korea andChina are also becoming importers, therebybenefitting countries like Vietnam, Indonesiaand other low-cost economies.
China and India are trade champions, withevery other country in the region looking atthese two markets as key opportunities. MostAsia Pacific economies are also likely to seetrade flows intensify to the Middle East.
Within Asia, bilateral trade corridorsinvolving China and India, are expected togrow fast. However, the swiftest growingglobal trade corridor will be India’s trade withMiddle East. The factors that make Asia the
most attractivedestination for globalcompanies include:the growth indisposable incomes;increasingurbanisation and theexpanding wealth ofthe middle class.
To best understandthe potential in this
region, it is not enough to study selectivecountries. Instead, a comprehensiveknowledge and understanding of the wholeof Asia is required.
Another evolving trade bloc of interest inAsia is the South Asian Association forRegional Cooperation (SAARC). Theeconomic integration under SAARC startedslowly. The preferential trading arrangement(SAPTA), the creation of free trade area(SAFTA) and the agreement on services(SATIS) are yet to make an effective impact.However, South Asia’s trade with its sub-regional and extended partners haveincreased significantly, with the former risingslowly and steadily while the latter is faster.Effective implementation of the trade deals is
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Berne Union 2015: Reviewing Asian trade
Regional trade flows –an Indian perspectiveGeetha Muralidhar, chairman and managing director of ECGC, assesses thechanging trade flows within Asia.
Geetha Muralidhar
In fact, the ‘Act East Policy’ can easily be widened to an ‘Act West Policy’ which includes the UAE as a door-opener for the oil-rich region. With thisfoothold, India can make its foray in West Asia, thusleading the infrastructural development of the warravaged region.
the key to the eventual success of SAFTA.India’s trade trends, and the direction of
Indian exports, have shifted considerably withall of these fast-growing regions. The EU usedto receive the largest share of Indian trade(approximately 20%) five years ago, but thishas now dropped to 15%. This missing shareof trade has been ceded to regions in Asia,the Middle East, and Asia-Pacific etc. Theerstwhile ‘Look East’ policy is being turnedinto an ‘Act East’ policy consciously by theGovernment of India. The collective weight ofthe population and economy in this region isacknowledged to be critical to global growthand prosperity.
Commerce with South and East Asiannations accounts for over 45% of India’sforeign trade.
In fact, the ‘Act East Policy’ can easily bewidened to an ‘Act West Policy’ whichincludes the UAE as a door-opener for theoil-rich region. With this foothold, India canmake its foray in West Asia, thus leading theinfrastructural development of the warravaged region. There are, in all, 11 majorFTAs/PTAs/CEPAs of India with variousbilateral partners / groups of countries. Sevenof them are FTAs, two of them are PTAs, withthe remaining under negotiation. All the nineconcluded agreements cover variouscountries and blocs in Asia, Asia-Pacific, andthe Middle East.
As regards ECGC’s business, over one thirdof the risk value covered is for exports tocountries in ASEAN, SAARC, Middle East andAsia Pacific. It is pertinent to note that theshare of these regions in India’s exports isover 50%. The exports to SAARC, Middle Eastand Asia-Pacific have been seeing anupswing while exports to ASEAN, which sawa 25% rise in the previous year, is expected toclimb further. The reverse scenario is
observed when it comes to the coverage ofexports to EU and North America. The shareof India’s exports to these regions are 14%and 12% respectively; whereas, the shares ofECGC’s coverage for these regions are about30% and 20% respectively.
The above analysis reflects the fact thatthe need, and demand for, credit insurancefor developed markets remain high owing tothe increasing commercial risks in the currenteconomic downturn. The demand for ECGC’scover to the regional destinations is alsoexpected to grow in the near future. Thereare over 150,000 importers underwritten inthese regions which are the focus areas forIndia’s exports. ■
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The exporters in India have a wide choice of about adozen types of insurance covers, courtesy ECGC. Thecovers could be declaration-based or exposure-based,buyer specific or contract specific, consignment-basedor stock holding-based and so on and so forth. If noneof the products is found suitable, tailor-made covers arealso possible for special circumstances. ECGC is truly aone stop solution for protection of trade receivables forIndian exporters.
Within Asia, bilateral tradecorridors involving Chinaand India, are expected togrow fast. However, theswiftest growing globaltrade corridor will beIndia’s trade with MiddleEast. The factors thatmake Asia the mostattractive destination forglobal companies include:the growth in disposableincomes; increasingurbanisation and theexpanding wealth of themiddle class.
ECA: KSUREKorea Trade Insurance Corporation
Borrower: Reliance Jio Infocomm Limited (RJIL)
Deal volume: $750m
Deal type: Export and Agency Finance
Industry: Cellular (network)
Country: India
Financial Close: 07/05/2015
Reliance Jio Infocomm Limited (RJIL)ECA-backed loan
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ECA: MEXIM- Export-Import Bank of Malaysia Berhad
Borrower: PacificLight Power
Deal volume: $509.53m
Deal type: Project and Infrastructure Finance
Industry: Energy
Country: Singapore
Financial Close: 23/03/2015
PacificLight PowerECA-backed loan
Vietnam AirlinesECA-backed loan
ECA: Export-Import Bank of the United States
(US Ex-Im)
Borrower: Vietnam Airlines
Deal volume: $589m
Industry: Transport
Country: Vietnam
Financial Close: 04/08/2015
throughout AsiaTop 5 ECA-backed deals
ECA: KSUREKorea Trade Insurance Corporation
Borrower: Quantum Pacific Shipping
Deal volume: $344.7m
Deal type: Export and Agency Finance
Industry: Shipping
Country: Singapore
Financial Close: 31/03/2015
Quantum Pacific ShippingECA-backed loan
Reliance Industries LimitedECA-backed loan
ECA: UK Export Finance
Borrower: Reliance Industries limited
Deal volume: $300m
Deal type: Export and Agency Finance
Industry: Oil and Gas
Country: India
Financial Close: 14/04/2015
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Although notable changes have beenwitnessed across the Middle East and NorthAfrica (MENA) region in the past fewdecades, the region has undeniablytransformed as of late. The year 2008 markedthe beginning of a myriad of challenges thatunfolded in the Middle East, be it from wars,financial crises, instability and politicaldevelopments. Businesses operating in theMENA region have felt the repercussions ofthese changes, and as a result manychallenges have surfaced. Several economieshave been impacted, and disruptions in thetrade sector have been recorded.
These shifts have triggered a growingdemand from clients, to protect their tradereceivables, as they carry out business in anunpredictable region. Clients have not onlyeyed the importance in being protected fromcommercial risks, such as delays of paymentsor the insolvency of a buyer, but also thepolitical risks in case of export transactions,such as war, transfer risks and licensecancellation.
Regional trade flowsThere has been a steady growth in exportswithin the Middle East, since 2010. Intra-regional exports in the Middle East increasedfrom $105 billion in 2010 to $134 billion in2014. In 2014, the majority of these exportswere mineral fuels and precious stones. Thesetwo major industries amounted toapproximately 32% of 2014 intra-regionalexports. In 2014, Turkey was the top exporterwithin the Middle East. Turkish exports to the
Middle East totalled$34 billion – with Iraq,UAE and Iran beingthe top importingcountries. SaudiArabia was thesecond top exporter,with $22.5 billionworth of intra-regional exports. UAEcame in as close third,
with intra-regional exports amounting to$22.4 billion.
On the other hand, exports from theMiddle East to the rest of the world haverecorded a slight decrease from 2013 to 2014.In 2014, the Middle East exported $1.3 trillionto the world, with mineral products andmetals amounting to 70% of that trade. Thetop three exporting countries were SaudiArabia, UAE and Turkey amounting to 56% ofall Middle Eastern exports to the world. In2013, Saudi Arabian exports to the worldamounted to $347 billion, the majority ofwhich was mineral fuels (85%). Meanwhile,UAE and Turkey exported $207 billion and$158 billion worth of goods respectively.
The resulting challengesAs the trade sector across the Middle Eastcontinues to grow, and import/export valueshave increased since 2012, there have beensome growing demands from clients toobtain a trade credit insurance policy.However, the awareness levels and spread oftrade credit insurance remains rather very low
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MENA: a regiontransformingBy Karim Nasrallah, general manager of the Lebanese Credit Insurer (LCI)
Karim Nasrallah
There have been some growing demands from clients toobtain a trade credit insurance policy. However, theawareness levels and spread of trade credit insuranceremains rather very low and concentrated amongst key suppliers.
and concentrated amongst key suppliers.In light of the ongoing changes across the
Middle East, additional challenges exist, thatgovernments and companies need to workon to bridge the gap. Markets across theMENA region are diverse in nature, and eachmarket is governed by a different legalframework. Therefore, prior to issuing a tradecredit insurance policy, extensive duediligence needs to be conducted, for both thesupplier and buyer – and the scarcity of
financial reporting and figures makes this taskmore difficult. There exists a pool of technical,commercial and legal challenges thatgovernments need to address, in order toenhance and facilitate trade in theirrespective countries, as well as make themmore ‘export-trade ready’.
Trade and export continue to be keyelements contributing to a country andregion’s growth and economic stability.Developing countries have become morecompetitive in this regard, and have beenable to grow where mature markets havefaced restrictions due to internal policies.
In light of the events that have unfoldedacross the MENA region and theconsequences which followed, there is agrowing need for the legal frameworks forseveral countries to be revisited. Insolvencylaws in particular, should be modernised andupdated, and consequently, governmentsshould ensure their enforceability.
Moreover, taxation related to exports andrelated services (including export creditinsurance) should be adapted to modernneeds and international practice. The same isthe case with the regulatory frameworkswhich no longer reflect modern trade needs.
Governments must also work to providereliable financial information as it is one of thekey tools of trade facilitation. Currently, inmost of the MENA jurisdictions, there is noobligation to publish the annual accounts ofcompanies and there is no existence of aregister of companies that would give accessto filed financial statements.
In the case of Egypt for example, a marketin flux yet thriving with opportunity, thereexists a non-supportive legal framework fortrade credit insurance providers. In addition,there is a lack of necessary or requiredtransparency from companies, and effectiveregulatory supported financial information isstill being developed. These factors greatlyincrease the risks that firms such as ours aretaking in such markets.
Finally, policy makers should make theimplementation of credit insurance (ECAs,private market, multilaterals etc.) a priority ontheir agenda, as the principal sustainable toolfor trade promotion and support. Legally andtechnically admitting credit insurance as atrade finance facilitation tool by the centralbanks of the governments of the regionwould aid in making the region more ‘tradeready’.
At present, the MENA region still has along way to go to be 'trade and exportready’. However, with the right laws andregulatory frameworks put in place, alongwith the disclosure of financial statements ofcompanies, and companies gaining greateraccess to credit insurance facilities, the MENAregion’s trading future looks promising.
The way forward for the Middle EastFaced with both challenges and uncertaintyin the MENA region, the outlook of the tradeindustry is debatable. However, with theongoing efforts of trade credit insurers andorganisations operating in this sector, whoare working to support the trade industry, theMiddle East region will likely see growth inthis area. With a more transparent legalframework and heightened financial reportingstandards, we are confident that our roles astrade credit providers and trade supporters ingeneral, will be enhanced. The Middle Easthas ample growth opportunities in the tradeindustry, and capitalising on them is a jointeffort. ■
SourcesInternational Trade Centre – Trade Map –www.trademap.org – ITC calculations based on UNCOMTRADE statistics.
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There exists a pool oftechnical, commercial andlegal challenges thatgovernments need toaddress, in order toenhance and facilitatetrade in their respectivecountries, as well as make them more ‘export-trade ready’.
The commodity driven growth in Africa hasgenerated a demand for stronger banks withmore capacity. As commodity prices arefalling and currencies weakening, Africancompanies are becoming increasinglyinterested in local financing solutions. At thesame time ECAs are becoming more active inthe region. But can ECAs and local banks finda match in each other?
Strong growth increases demand forlocal financial solutionsThe average economic growth rate in sub-Saharan Africa during the last decade hasbeen almost 6% according to the IMF. This isone of the highest growth rates in the world.It is impressive, even though it starts from alow base. This growth rate has been driven toa large extent by commodities, but also byinvestment in infrastructure and construction,by agricultural development and bymanufacturing and services. Even thoughexternal financing and funding frominternational banks traditionally has beenmore attractive, Africa’s engagement in worldeconomic activity is continuously increasing,and along with that comes a demand foradequate financial services and solutionsprovided in the local markets where thesecompanies are based.
During the last year, the oil price has roughlyhalved and most other commodities havefollowed the same path. As commodity pricesare falling, so are the currencies in Africa’smany commodity-producing countries. Thisaccentuates the need from companies to havetheir loans in the same currency as theirrevenues, to be able to focus on their businessand not on managing exchange rate risks. Thisis also a factor increasing the demands on the
local banks’ ability toprovide adequatefinancial solutions tolocal companies.
This demand is alsoseen by EKN. Wereceive an increasingnumber of inquiriesfrom African banks toact as policy holdersin Swedish exporttransactions. Andthere are a number ofadvantages for anECA to have a localbank as a policyholder. EKN’sexperience fromhaving Standard Bankas a policy holder in alarge powertransaction in Zambiais that the local bank
has a better knowledge of the domesticmarket. This includes experience of thecompanies acting in this market, and also oflocal authorities, governments and politicalpriorities that are relevant for the transaction.
Local banks as ECA policy holders Despite the increased interest from localbanks, guaranteeing transactions with localbanks as policy holders seems to be a rarething among ECAs. Why is that?
There are some challenges in having localbanks as policy holders. Some are regulatory,such as limitations regarding the ability ofECAs to act as insurers in a domesticcontract. This reduces the potentialcollaboration with local banks to transactions
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Increased collaborationwith African banks -what are the avenuesahead for ECAs?By Rebecka Lundgren, country analyst, Africa, EKN, and Karl-Oskar Olming,Africa representative, EKN
Rebecka Lundgren
Karl-Oskar Olming
in third countries, such as the example ofEKN issuing a guarantee to Standard BankSouth Africa for a transaction in Zambia.Other regulatory challenges are local.
One key advantage for the lending bank inreceiving ECA support is the capital relief onthe balance sheet as sovereign guaranteesprovided by ECAs is one of the most reliableand solid trade credit enhancement toolsavailable to banks globally. Unfortunately, inmany African countries the central bank doesnot allow banks any capital relief even if theyhave an ECA guarantee. Without the capitalrelief it is difficult for local banks to justifyworking with ECAs. The central banks arguethat there is no demand for such a relief andin many countries it would require a changein the law. From a BU perspective it isimportant to identify regulations thatadversely affect the use of credit insuranceinstruments. The BU could possibly engagewith central banks in Africa that do not allowcapital relief for credit guarantee instruments.
Risk related challengesThere are also challenges coming from a riskperspective. Every ECA has some kind ofminimum requirements that a bank mustfulfill to be considered as policy holder. TheECA needs to be assured that the lender is atrustworthy risk partner, someone to rely onin good times as well as in bad times. It is alsopreferable that the bank has certainknowledge and experience of ECA financingand the related regulatory framework.
Another issue relates to the generalregulatory environment and the supervision ofthe banking system in the country in question.There are various ways of expressing theseminimum requirements, but if an investmentgrade rating from one of the three large ratingagencies is used as a proxy for a sufficientcreditworthiness, only 12 banks in Africa areeligible – of which eight are South Africanaccording to data from Bankscope, a globalbank information provider. Anotheroperational risk in working with local banks ingeneral is the risk of conflicts of interestbetween the policy holder and the debtor.The ECA needs to ensure that the two partiesdo not act together in a way that increasesthe probability of default in the transaction.
Successful bank relationships, butKYC is changing the landscapeLocal banks acting as policy holders in ECA-backed transactions can be challenging, butthere are alternative ways of achieving this.
One example is EKN’s collaboration withAfrican Export-Import Bank (Afreximbank),which started in 2009. It is a framework set-up where EKN guarantees loans to variousinternational banks for the purchase ofSwedish equipment by African companies.Afreximbank acts as borrower in theframework guarantee, and then on-lends tothe African companies. This is a win-win forall parties. EKN becomes willing to issue aguarantee, since our risk is on Afreximbankand Afreximbank has the risk on the endbuyer. EKN’s guarantee in turn makes thebank willing to arrange a financing for thetransaction in question. And the premiumcharged is undoubtedly lower, given thatAfreximbank is classified as county riskcategory 4 sovereign risk.
Another potential structure forcollaboration with local banks is via letter ofcredit (LC) guarantees. In this structure theECA shares the risk with the bank confirmingan LC opened by a local bank. Thanks to theLC guarantee, covering half or more of therisk, the bank gets more capacity on localbanks, enabling them to do more business.This is a structure that is frequently used bySwedish banks, mainly in the more complexAfrican markets. During 2014, EKN issued 104LC-guarantees in sub Saharan Africa.
The LC market is however affected by theincreasing demands on Know Your Customer(KYC) due diligence, with the purpose ofcombatting money laundering, terrorismfinancing and sanctioned entities. Banks are,in order to streamline trade financeadministration, reducing the number ofcorresponding banks.
The way forwardThere is reason to believe that along with theeconomic development and integration of theAfrican continent, the collaboration betweenECAs and African banks will increase. Andthere is scope for ECAs to be more pro-activein terms of overcoming the related regulatorychallenges. It is unclear though how thecapacity of African banks will be affected byincreasing demands on KYC. Fewercorrespondent banks in Africa may lead to agreater need for risk sharing with ECAs and itmight actually deepen the remainingrelationships. For ECAs it means lessexposure to many different local banks, butalso an opportunity to develop newrelationships with local banks as policyholders in order to promote a country’sfinancing capabilities. ■
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Following the international trend in thecreation of export credit agencies (ECAs)after World War II, South Africa began tooffer official support for export transactionsin 1957. Instead of creating a dedicated ECA,reinsurance cover was made through theDepartment of Trade and Industry, the dti(then known as the Department of EconomicAffairs) and the Credit Guarantee InsuranceCorporation of Africa Limited (CreditGuarantee). This relationship lasted for morethan 40 years.
Over the years, a review of the exportcredit insurance market gap showed thatprivate participation in the short-term tradefinance market was adequate and thatgovernment involvement was crowding out(instead of complementing) private sectorparticipation. However, in the case of medium to long-term transactions,government involvement was still very muchrequired, especially in respect of emergingmarkets.
Subsequently, as from 1 July 2001, theSouth African government decided todiscontinue its involvement in the provision ofreinsurance cover for short-term transactionsand focused only on medium to long-termexport transactions. With effect from 2 July2001, a dedicated ECA was established in theform of Export Credit Insurance Corporationof South Africa (ECIC).
The ECIC was established as part of abroader government policy in the context ofindustrial policy, trade and investmentpromotion. As the official export creditagency of South Africa, the ECIC acts as an“insurer of last resort” by providing insurance
for exporttransactions that willotherwise not takeplace becausecommercial lendersare either unable orunwilling to acceptthe risks (politically orcommercially)inherent in long-termtransactions.
The corporation’s enabling act is theExport Credit Investments Insurance Act 1957,as amended. The ECIC is an independent,limited liability company, with thegovernment as the sole shareholder.
Our vision is clear: we are determined tobe the leaders in the medium- and long-termexport credit and investment insurancebusiness, focusing on project financeunderwriting, customer needs, and prudentportfolio and risk management.
Facilitating projects throughout AfricaAccordingly, our mission is to facilitate andencourage South African export trade byunderwriting export credit loans andinvestments outside South Africa, which willhelp contractors win international capitalgoods and services contracts.
The ECIC fosters a stronger South Africaneconomy by supporting exports of SouthAfrican goods and services that can drivedomestic job creation, contribute to fixedcapital formation, to GDP and generate fiscalrevenue for the country. The rationale for thepositive impact of the ECIC on economicdevelopment is based on the assertion that,
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ECIC plays a pivotalrole in sub-Saharanprojects anddevelopment By Kutoane Kutoane, chief executive officer, Export Credit InsuranceCorporation of South Africa (ECIC)
Kutoane Kutoane
with ECIC support and participation, exportsfrom South Africa are enabled to take place.
The South African content requirement forexport projects supported by ECIC ensureseconomic benefits for both South Africa andthe host economies. For illustration purpose,in the financial year ended March 2015, theECIC signed insurance policies for exporttransactions to the value of ZAR6.7 billion($489 million), which generated a total of12,272 job opportunities in South Africa. Ofthese, a substantial number of jobopportunities were recorded for unskilledworkers, which is a high priority for SouthAfrica. Equally, in the host countries 14,943job opportunities were created during theconstruction phase and 17,662 jobopportunities are expected to be sustainedon an annual basis (for the next 20 years)during the operational phase of the projectssupported.
The corporation has also been a generatorof tax revenue for governments, havingreturned approximately ZAR831 million ($60.6million) and ZAR3.6 billion ($262.4 billion) inadditional tax revenue to the South Africanand host economies finances, respectively.
Since inception, ECIC has played aremarkable role in facilitating and supporting
the construction and expansion of projectson the continent in different sectors and atdifferent levels. The ECIC’s participation hasenabled various economies to optimise theirproduction and export potential in strategicsectors such as mining, agriculture, energyand infrastructure.
In agriculture, the ECIC’s support extendedfrom simple plantation (e.g. sugar plantationin Mozambique) to agro-processing (ethanolproduction from sugar cane in Sierra Leone),whereas in mining ECIC helped ease thefunding of extractive activities and associatedprocessing plants (e.g. copper plant inZambia, gold mining in Liberia and diamondmining in Lesotho). In the energy sector wehave recently concluded a PPP (public-private partnership) renewable energyproject in Ghana for the generation of power.
Providing an equal footing in financeCapital projects involve large amounts ofmoney. Whilst some of the required funds arenormally contributed through equity byproject sponsors, the bulk of the requirementis mostly likely to come in the form of loanfinance. In order for a potential exporter tosuccessfully tender for a project it is oftenessential to be able to offer term finance.
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Naturally, the price of the insuranceproducts offered and the cost of finance tobe offered have to face internationalcompetition. This cost of finance is affectedby a range of factors, including South Africa’ssovereign rating, which is currently in thelowest bracket of investment grade.
Hence, in order to bring South Africanexporters on an equal footing withinternational competitors, the interest leviedon loans which are insured with ECIC arebenchmarked on the Commercial InterestReferences Rates (CIRR) set by OECD or theLibor. To make the interest rates on the ECICsupported loans economical, the DTIprovided an incentive – interest make-up(IMU) – through the ECIC to enablecompetitive bids for export transactions.
The ECIC therefore acts as an agent onbehalf of the dti in administering IMUpayments to South African exporters orfinancial institutions in respect of qualifyingprojects. The IMU payment to South Africanfinancial institutions enables them to offer termfinance at internationally competitive interestrates, thus securing the export of SouthAfrican goods and services to qualifyingprojects. In other words, the IMU assists inleveling the playing field by facilitatingcompetitive borrowing terms to foreign buyersof South African capital goods and services.
Since the 2008 global economic crunch,developing countries have been able torecord high economic growth rates andpropelled global growth. These economiesare expected to remain the most importantdrivers of the world economy and globaltrade in the medium to long run. In the pastthree years, six out of 10 of the fastestgrowing economies have been in Africa.
The continent is rich in natural resourceswhich include arable land, minerals, andhydropower, to name just a few. In theextractives sector, for example, it is estimatedthat the region accounts for about 30% of allglobal minerals reserves. Its proven oilreserves constitute 8% of the world’s reservesand those of natural gas amount to 7%.Minerals account for an average of 70% oftotal African exports.
However, the region is considered as oneof the world’s higher-risk markets. Thecontinent is characterised by politicalinstability, uncertainty in the regulatoryissues, mounting terrorism activities, data and information unreliability and lack ofadequate infrastructure. It can be assumedthat ECIC is well positioned on the continent
to better understand the problems which arefaced by the leaders, economic operators andthe realm of foreign investors in general.About 90% of our current portfolio is locatedin Africa, where Zambia, Zimbabwe andGhana account for 25%, 16% and 15%respectively.
As a dynamic institution, scanning theenvironment and working to meet the needsof SA economic operators, we are workinghand in hand with our shareholder (the dti)and all stakeholders, through market researchand business development units to developnew insurance products to ensure that oursupport for government’s export promotionpolicy objectives are met. We are in theprocess of launching the Performance Bondinsurance cover. We are working on thecoverage of credit lines and return of plantsand equipment, among other products.
Moreover, to help release more lendingcapacity for our financial institutions, we haveentered into various agreements with otherECAs to establish a framework for co-insurance and re-insurance. A major case tomention, ECIC has recently adopted acomprehensive plan of action along with theBRICS partner-ECAs aimed at actualising thecooperation programme for mutual benefitsas envisioned in the MoU signed in 2014 inFortaleza, Brazil. To this end, ECIC willactively pursue re-insurance and co-insuranceopportunities with the BRICS ECAs,especially across sub-Saharan Africa.
Actually, the major region in thecomposition of the ECIC exposure is Africa.Being based on the continent, we considerthat we have a better understanding of theproblems which are faced by the leaders,economic operators and the realm of foreigninvestors in general.
To bring a sustainable growth anddevelopment path, the extraction of resourcesshould be buttressed by a mineraltransformation process on the continent. Thisprevails for agricultural activities as well.Exports should not be made of rawcommodities only but processed goods aswell. To achieve such a transformation, Africawill need to overcome four major obstacles:access to capital markets, transfusion of thetechnological know-how, overcominginfrastructure hurdles and lack of political will(saying and doing it). And the ECIC has a roleto play in addressing some of these obstacles,through facilitation and increase of fundingcapacity for the construction of infrastructureand acquisition of processing plants. ■
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Military refuse, abandoned railroad networks,vehicles, mining equipment: What to do withthe remnants of civil war? In Angola, acompany insured by MIGA is turning theminto the core material for criticalinfrastructure.
The country still has an abundance ofscrap metal littered throughout its territory, alegacy of the protracted civil conflict thatended in 2002. Aceria de Angola SA is usinga significant amount of that scrap to recycleinto much-needed steel rebar for theconstruction industry. Our guarantee of $70million covers an equity investment into thecompany against the risks of transferrestriction, expropriation, and war and civildisturbance.
Up until now, Angola has imported nearlyall of its steel, with local production limited tosmall-scale enterprises. Aceria de Angola isnearing completion of the greenfield steelrebar plant in Bengo Province, 40 kilometersnorth-east of the capital Luanda. The plantconsists of a melt shop to convert scrapmetal into steel billets and a rolling mill that
will use the billets toproduce rebar andwire rods. The factorywill have an installedcapacity of 250,000tons per year, meetinga significant portionof the demand forsteel rebar in thecountry.
The project is oneof the first large-scale industrial projects inAngola outside of the oil sector. While thegovernment has started to actively promoteeconomic diversification by supportinginvestments in non-oil sectors, riskperceptions remain elevated – especially forlarge investments. For Aceria de Angola,MIGA is playing an important role inmanaging that risk and sending a signal toother would-be investors.
Not for the faint of heartWhile MIGA’s clients – two brothers withmore than 20 years of experience in Angola –
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MIGA-supportedinvestment in Angolaturns war scrap intoconstruction steel By Noureddin Ennaboulssi, senior underwriter, Multilateral InvestmentGuarantee Agency (MIGA)
Noureddin Ennaboulssi
The country still has an abundance of scrap metallittered throughout its territory, a legacy of theprotracted civil conflict that ended in 2002. Aceria deAngola is using a significant amount of that scrap torecycle into much-needed steel rebar for theconstruction industry.
are experienced international investors, theyhave faced challenges cutting throughbureaucratic red tape to lay the groundworkfor the plant.
Moreover, in a country where 30% of thepopulation has access to power, the investorshave gone so far as to finance and build 50kilometers of dedicated high-voltageelectricity transmission lines and a substation– in cooperation with ENE and Angolanconstruction firm Omatapalo – in order tosecure a steady source of electricity for theproject. In order to get the water that is animportant production input for steelmanufacturing, the investors had to build thecapacity to pump water from a local river.These, and more, are the significant hurdlesthat the investors have overcome to get theproject off the ground.
How MIGA adds value In response to the recent drop in oil prices,the World Bank Group has substantiallyscaled up its engagement in Angola and is akey factor of the government’s response tothe difficulties the economy is experiencing.As the political risk insurance and creditenhancement arm of the World Bank Group,MIGA’s support to this project forms animportant part of this effort.
MIGA’s role in this project – as it is with allthe agency insures – is to give investors thecomfort they need to build and maintaingood projects in challenging environments.
But, in this case, the agency also took anactive role in advising the family-ownedbusiness on best international practices anddue diligence with respect to feasibilitystudies, financial credentials, transparency, aswell as environmental and social standards –ushering in, hopefully, a new era for moredevelopmentally-sound investments intoAngola.
Investments that MIGA insures mustdemonstrate that they will have a positive
development impact on the host country andAceria de Angola is no exception. The plantwill comply with European and Brazilian steelcertification standards and the rebar will beproduced according to ISO9001 standards,matching the quality of imported rebar.
Scrap collection will generate hugeenvironmental benefits through the clean-upof the littered countryside. It will also createsignificant new employment in a country stillsuffering the devastating effects of war –potentially generating more than 2,500 directand indirect jobs, many of which will benefitpeople in rural areas.
What makes this project stand out is theclient’s vision for a smart and sound projectfor the country, our hands-on cooperation,and the overall context of helping Angoladiversify its economy at this difficult moment.
Indeed, our support to Aceria de Angola isa strong example of the important role MIGAplays in getting investments that have apositive developmental impact intochallenging contexts. ■
Noureddin Ennaboulssi is the MultilateralInvestment Guarantee Agency’s (MIGA’s)senior underwriter who led the team on thisproject.
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Scrap collection will generate huge environmentalbenefits through the clean-up of the litteredcountryside. It will also create significant newemployment in a country still suffering the devastatingeffects of war – potentially generating more than 2,500direct and indirect jobs, many of which will benefitpeople in rural areas.
In response to the recentdrop in oil prices, theWorld Bank Group hassubstantially scaled up itsengagement in Angolaand is a key factor of thegovernment’s response to the difficulties theeconomy is experiencing.
With 96% of its rural population livingwithout electricity, Zambia is in great needfor transmission and distribution lines toreach new regions and villages. In this caseEKN’s guarantee enabled the financing of an850 km long transmission line that willreplace diesel generated power withhydropower. Swedish power transmission anddistribution EPC contractor Eltel Networks isbuilding the transmission line and associatedsubstations.
Only 30%-40% of the African populationhas access to electricity. This is a majorconstraint for the ability to escape poverty.Lack of electricity means businesses thatcannot invest in factories, children whocannot do their homework in the evening andhospitals that cannot provide adequatehealthcare to their patients. To increaseaccess to electricity it is estimated that anadditional $23 billion per year is needed innew investments in power infrastructure.There is not one solution to this challenge,but increasing commercial financing of energy infrastructure is a must to power Africa.
Financing - one key to successFinancing is one of the major constraints indeveloping power projects in Africa. EKNtherefore puts an extra effort intounderstanding the financing challenges onthe continent and actively identifies projectswhere Swedish export financing can be part
of the solutiontogether with otherplayers such asmultilateraldevelopment banks,developmentassistance etc. EKN iscommitted to supportthe financing of highquality, reliable andresponsible power
solutions in Africa in the years to come.EKN is an active ECA in Africa supporting
both large and small transactions. During2014, 18% of EKN’s issued guarantees werefor transactions to 29 countries in sub-Saharan Africa. In Zambia, EKN supportedthe construction of a transmission line toreplace diesel-generated electricity withhydroelectricity. This is a win-win both for thelocally employed workers and localbusinesses who can count on a reliable powersupply as well as our climate.
Electricity from renewable sourcesdoes not reach all regionsAccess to power is one of the single mostimportant barriers to economic developmenton the African continent. In Zambia thenational grid does not reach all regions in thecountry with its centrally producedhydropower.
One million of the country's 15 millioninhabitants live in the north-western parts of
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Reasons to be cheerful:Powering remote areasin Zambia withrenewable energyBy Karl-Oskar Olming, Africa representative, EKN
Karl-Oskar Olming
During 2014, 18% of EKN’s issued guarantees were fortransactions to 29 countries in sub-Saharan Africa.
Zambia. This part of the country is notconnected to the national grid, and as a resultthe consumption of electricity is low.Furthermore, the energy consumed isproduced using non-renewable sources.Today’s diesel-based energy production inthat region emits in the range of 36,000 tonsof carbon dioxide every year. Significantlymore than the 500 tons of the energy isreplaced by electricity from the national grid.With a stable electricity supply, the averageuse of electricity per person is also expectedto increase as economic activity andproductivity increases in the province.
Connection of Zambia’s NorthWestern Province to the national gridThe main objective with the 132 kVtransmission line is to link the North WesternProvince (NWP) to the national power gridand replace the diesel generated electricity inwith hydroelectricity. The project wasawarded to the Swedish power transmissionand distribution EPC contractor EltelNetworks. Eltel Networks has a long historyof successful implementation of powerprojects in Africa.
Combined with an attractive commercialfinancing, Eltel was awarded the $150 millioncontract by Zesco, Zambia Electricity SupplyCorporation. The financing solution includedStandard Bank, Nordea, Swedish ExportCredit Corporation (SEK) and EKN. EKNprovided a buyer credit guarantee to thelending banks. EKN also played an importantrole in setting the environmental and socialrequirements for the transaction. These willbe monitored during the construction phase.
Commitment to local suppliers andemployeesWhat signifies Eltel’s approach to projectimplementation in Africa is their commitmentto local suppliers and employees, combinedwith a high standard of environmental andsocial management. In countries with limited
job opportunities and a lack of skilledworkforce, Eltel takes on a responsibility toeducate and build capacity locally. It is goodfor the community, but also for future Eltelcontracts and maintenance.
For the country it means support inbuilding the soft infrastructure that is soimportant to maintain large investments andincreasingly being able to rely on localcompanies and expertise. For Eltel it means alot of on the job training and frequentseminars to sensitise the more than onethousand local workers to environmentalprinciples and safety rules and regulations.
Environmental and social impactassessmentBefore constructing the 850 km transmissionline and substations, an environmental andsocial impact assessment was carried out.The purpose was to identify risk impacts, aswell as make plans to avoid, minimise oroffset impacts to workers, affectedcommunities, and the environment. This wasall performed in line with internationalstandards. This is an important aspect in allEKN-supported transactions.
Some of the actions taken were to avoidagricultural and environmentally protectedland, ensure compensation for economic lossof land, and provide training on health andsafety both at work and off work. Oneexample is the HIV/Aids information centresthat are set up during the construction phase.
In order to facilitate communication withlocal stakeholders, a grievance mechanism foraffected communities was set up as well as aplan for engagement with them throughoutthe project cycle. This mechanism can handleissues that could potentially affect thecommunities and ensure that relevantenvironmental and social information isdisclosed and disseminated.
Powering remote areas with renewableenergy is key to development and a reason tobe cheerful for sure. ■
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To increase access to electricity it is estimated that an additional $23 billion per year is needed in newinvestments in power infrastructure. There is not one solution to this challenge, but increasingcommercial financing of energy infrastructure is a must to power Africa.
ECA: COFACE
Borrower: Government of Egypt
Deal volume: $2.26bn
Deal type: Export and agency finance
Industry: Capital Equipment
Country: Egypt
Financial Close: 16/04/2015
Government of EgyptECA backed loan
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ECA: COFACE
Borrower: Government of Egypt
Deal volume: $678.24m
Deal type: Export and Agency Finance
Industry: Defence
Country: Egypt
Financial Close: 16/04/2015
Government of EgyptECA backed loan
throughout AfricaTop 5 ECA-backed deals
ECA: SACE
Borrower: Kenya Pipeline Company (KPC), MoF Kenya
Deal volume: $334.7m
Deal type: Project and Infrastructure Finance
Industry: Infrastructure
Country: Kenya
Financial Close: 15/07/2015
MoF KenyaECA-backed loan
Ministry of Finance,United Republic of Tanzania
ECA - Backed Loan
ECA: Japan Bankfor International Cooperation (JBIC)
Borrower: Ministry of Finance,
United Republic of Tanzania
Deal volume: $292m
Deal type: Project and Infrastructure Finance
Industry: Energy
Country: Tanzania
Financial Close: 27/03/2015
Maamba Colleries Limited (MCL)ECA - Direct loan
ECA: Sinosure
Borrower: Maamba Colleries Limited (MCL)
Deal volume: $828m
Deal type: Project and Infrastructure Finance
Industry: Energy
Country: Zambia
Financial Close: 30/07/2015
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The North American Free Trade Association(NAFTA) came into effect on 1 January 1994,and with it arrived a fundamental structuralchange. In fact, Mexico embraced anambitious process of economic opening andconsolidated the liberalisation of its tradepolicy initiated in the late 1980s. The Mexicaneconomy made the external sector thechannel of the dynamism of growth and of anew vision of the country.
The more general balance that can behighlighted is that, over the past twodecades, GDP in constant pesos has grown70%, i.e. an average annual growth rate(AAGR) of 2.6%. On the other hand,measured in constant pesos, exports tripledover the same period, with an AAGR of 5.5%, while in nominal dollars, exportsquintupled from $50 billion to $400 billionthanks to access to the largest consumer in the world market. In fact, between 1994
and 2014 exports to the United Statesand Canada grew 7.4 times (see picture 1).
In addition, totaltrade (exports plusimports) is 6.7 timeslarger than it wasprior to the entry intoforce of NAFTA (seepicture 2). This
accelerated growth of trade prospects hasbeen a centre of attraction to foreign directinvestment (FDI). The expansion of FDI hasbeen impressive with a very significantincrease. Indeed, FDI flows were $4.9 billionin 1993, while the FDI flows from 1999 up to the second quarter of 2015 totalled $406.8 billion.
At this point, perhaps the most important
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Berne Union 2015: NAFTA and Bancomext
Luis HumbertoVillalpando Venegas
Picture 1
NAFTA and thefinancing of exports:the case of BancomextBy Luis Humberto Villalpando Venegas, vice president of economic analysis, Bancomext
thing to emphasise is not only total FDI butalso the economic sectors to which it hasbeen destined in recent years. The degree ofsophistication of the FDI in productivesectors has increased significantly, forexample to the automotive, auto-parts,aerospace and electronics industries. By thisapproach, through international trade, theMexican economy transformed from aneconomy of raw material exports, particularlyoil, to an economy where its main engine ofgrowth is manufacturing exports (see picture 3).
NAFTA came into being in an era whereglobalisation, or regionalisation, havegenerated calls for Global Value Chains (GVC)where the production of goods is processedand conducted in several countries, in orderto improve production and distribution costs.It is in these GVC that the Mexican economyhas been favoured by its NAFTA membershipand its geographical proximity to UnitedStates and Canada, as well as its advantages
of an abundant, qualified and low-cost labourforce, in addition to other advantages ofinternational competitiveness.
It is in this context of trade liberalisation,globalisation and regionalisation, where theMexican finance sector has become a majorforce to increase productivity and the added
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Berne Union 2015: NAFTA and Bancomext
Picture 2
Picture 3
NAFTA came into being inan era where globalisation,or regionalisation, havegenerated calls for GlobalValue Chains (GVC) wherethe production of goods isprocessed and conductedin several countries.
value of production. Indeed, both for nationaland foreign businesses, a critical factor toinsert companies in the GVC has been theavailability of credit. The financial systemefforts have been very important forfinancing in this new reality of increasedinternational trade for Mexico. However, it isstill necessary to grow credit penetration tointernational levels. Financing to the privatesector has increased from 17% of GDP in 1990to 28% of GDP in 2015, but it still falls short inrelation to what the external sector-orientedenterprises need. In particular, this growthhas not been what the country needs toprovide small and medium-sized enterprisesthat are integrated into these global chains ofproduction.
An area of opportunity has been openedfor the financing of the exporting companies.The National Bank of Foreign Trade(Bancomext), thanks to the change in the
orientation of public credit in the presentadministration policy, has intensified itsparticipation in the promotion of the foreigntrade sector. Bancomext, as part of the newpolicy, has ceased to finance public sectorforeign trade and is focused in financingprivate companies involved in foreign tradeand other currency generation activities (seepicture 4).
In addition, it is focused in offering long-term loans, as shown in the composition ofthe portfolio as of December 2014, where85% of its loan portfolio shows maturitiesgreater than one year. This change in thevision of Bancomext has generated a verypositive growth dynamic in its loan portfoliowhich is a clear sign of the demand forfinancing of export sectors in the Mexicaneconomy. The success of Bancomext is dueto a credit offer customised to the needs ofMexican exporters; unlike commercial banksfollowing policies dictated, in many cases,from other countries, which gives them littleflexibility to make loans to foreign trade
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Picture 4
Picture 5
Through internationaltrade, the Mexicaneconomy transformedfrom an economy of rawmaterial exports,particularly oil, to aneconomy, where its mainengine of growth ismanufacturing exports.
fitting the needs of the Mexican economy(see picture 5).
Direct financing and guarantees offered byBancomext differ from financing provided byprivate banking in several respects1. Inparticular, significant differences have beenfound in the mean values of the followingvariables:
Credit destination: Bancomext loans have agreater impact on gross capital investment ofcompanies than private banking loans. Whilecompanies allocated 62% of private bankingcredit to working capital and 25% to physicalinvestment; for Bancomext loans thesefigures were 36% and 42%, respectively.Additionally, private bank credit earmarked toSMEs, allocation to working capital wasreduced by companies when the creditinvolved a Bancomext guarantee, thus, it canbe inferred that this guarantee allowed for agreater orientation of the credit toinvestment or other purposes.
Credit tenor: The average term ofBancomext loans exceeded by 16 months thetenor of private banks. This result is in linewith Bancomext greater support to projectsof creation of capital goods.
Interest rate: Bancomext loans had aninterest rate 6.6 percentage points lower thanthose provided by private banks2. Also, agreater dispersion was observed from theprivate banks. As for private banking loanswith or without a Bancomext guarantee,there was a significant difference in theirinterest rates.
From this analysis it can be concluded thatBancomext´s financial offering complementsthat of private banks by providing distinctivefeatures as per its clear development mission,supporting the companies need for grosscapital formation. Thus, Bancomext helpsimprove economic growth in the country and,in particular, the growth of export production,both directly and through private banks withBancomext guarantees.
In this way, it can be said that export
financing in Mexico is an area yet to beexploited by private banks where there areseveral market niches that could be attendedby small and medium-sized banks. Even
though Bancomext´s social role directs itsresources to address many of these niches,its efforts are insufficient considering thepace of growth of Mexico’s internationaltrade. In addition, Bancomext financingshould be a temporary support for anycompany, while private banks should take themain role in financing this sector withsufficiency and opportunity, releasingBancomext so it can direct its resources todevelop other export sectors or foreigncurrency generation potential of othereconomic sectors. ■
Notes1 In 2013, the Universidad Nacional Autónoma de
México (UNAM) carried out an analysis of financingconsidering beneficiaries of Bancomext credit andguarantee programes and companies without thissupport, in order to identify the existence ofdifferences from both types of financial support. Tothis end, the UNAM compared the characteristics offinancing from Bancomext (treatment group) andfrom private banks (control group).
2 The difference in interest rates is a result ofBancomext´s loans being predominantly in USdollars. It must be noted that Bancomext interestrates are calculated considering all market variablesand do not involve any subsidy component.
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Berne Union 2015: NAFTA and Bancomext
Bancomext, as part of thenew policy, has ceased tofinance public sectorforeign trade and isfocused in financingprivate companiesinvolved in foreign tradeand other currencygeneration activities.
It can be said that export financing in Mexico is an areayet to be exploited by private banks where there areseveral market niches that could be attended by smalland medium-sized banks.
Prices for crude oil and other commoditieshave been on the decline since last year, asincreased production by key producers andweak global demand has left the marketoversupplied. In particular, the drop in oilprices to $50 dollars per barrel has had awide-sweeping effect on the global economyand in particular, has negatively impactedemerging market countries who are netexporters of the commodity.
Low commodity prices have increased therisk of expropriation, political violence,sovereign debt repayment, and have addedfinancial stress to commodity-relatedborrowers. Of course, there are some that arenet oil importers that will benefit from lowerprices such as India, Jordan, Lebanon,Morocco, South Africa, Zambia, and Tunisia.However, benefits will be offset by widergeopolitical and market developments thathave increased political risk throughout theworld.
For emerging market countries, internalpolitical dynamics will matter just as much, ifnot even more, than economic fundamentalswhen determining how they might react tolow commodity prices. The outcome oncompanies with exposure in these areas willvary according to the path chosen in eachcountry.
Expropriation risk on the riseHigh commodity prices are often associatedwith resource nationalism, wheregovernments have renegotiated contract
terms, imposed highertaxes and, in somecases, expropriated ornationalisedinvestments in orderto obtain higherreturns. Historically,higher commodityprices have resulted inexpropriations inRussia, Bolivia,
Venezuela and Ecuador.Some analysts argue that in the current
environment of lower commodity prices,expropriation should be limited, sincecountries that are struggling to increaseproduction/revenue and attract investmentwill be motivated to make changes in theirregulatory regimes and improve theirbusiness environments in order to attractforeign investment. However, it is oftendifficult to predict how a country mightbehave in such a low-commodityenvironment, especially if it is essentiallycontrolled by a single leader, overly reliant onresource revenues for its budget and beingstrained by additional economic and politicalpressures.
Expropriation risk may actually increasefor companies operating in commoditysectors. Ian Bremmer, president of EurasiaGroup, a global political risk consulting firm,has stated: “In difficult budgetary conditions,expropriation (usually surrounded bynationalist or ideological rhetoric) can
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Berne Union 2015: Commodity volatility and political risk
The price of cheap oilcomes at a price ofhigher political riskBy Katherine Zylinski, portfolio analyst, credit and political risk productunderwriting, Zurich, North America
Katherine Zylinski
Historically, higher commodity prices have resulted inexpropriations in Russia, Bolivia, Venezuela and Ecuador.
provide a government with a quick infusion ofcash.”1
While expropriation may not result in anoutright taking, there are increased risks ofmore subtle forms of expropriation such asinstituting taxes or requiring companies togive up ownership control. Even ifcorporations seek to mitigate their risks bystructuring their investments throughinternational guarantees or legal contracts,governments may still exercise creepingexpropriation as it is more difficult to prove inthe legal system.
Russia is an example of a country facingsome increasingly momentous decisions.Rising inflation has already hurt householdpurchasing power and reduced spending inRussia, and IHS predicts that the plunge in oilprices, along with economic sanctions andcapital flight, will send Russia into a severerecession in 2015-16.2 Sanctions have limitedRussia’s access to technology and Westerncapital and its strategy of turning to China tofill the financial gap left will be hampered byChina’s own economic slow-down. Thesefactors have shifted the bargaining poweraway from Russia; however the risk ofexpropriation has not been eliminated.
Government policy may turn towardincreasing conflict in the form of retaliatorysanctions or expropriations, or (consideredless likely by most observers) it may becomemore conciliatory towards the West.Companies need to be ready for eitherscenario.
Loan defaults on the horizon? A prolonged decline in commodity prices isputting stress on commodity companies inemerging markets, increasing the risk of loanrestructurings and defaults. Companies thatalready have high debt burdens and hadexpected a steady demand from fast-growingeconomies, such as China, will experiencedepressed cash flows and may find it difficultservice their debt.
Volatility in commodity prices and demandis a material risk that is often understatedwhen underwriting these types of entities.Especially, the long-term risk factor of
fluctuating prices and demand is not oftengiven due consideration.
Sovereign debt repayment underpressureCountries that are dependent on oil exportsand that do not have sufficient foreignexchange reserves will experience budgetaryand current account stress, ultimately leadingto sovereign credit risk downgrades and inthe worst case scenario, defaults. Lower oilprices will certainly hurt Saudi Arabia, Kuwaitand the United Arab Emirates. However, theseGulf countries have strong reserves and theability to access the capital markets due totheir strong credit ratings.
On the contrary, other oil-rich countries,like Iran, Libya, Algeria, Nigeria, Angola,Mozambique, Venezuela, Ecuador, Azerbaijan,Kazakhstan and Turkmenistan, will experiencefinancial stress due to their insufficient levelof reserves. The political risk insurancemarket can expect payment delays fromthese countries, especially if the country hasfunded many large development projects.The cancellation or forced renegotiation ofcontracts will also be common. Furthermore,with commodity revenues down, somecountries might not have the resources tosupport state-owned enterprises, especiallythose that are not considered strategic forthe country. Political leaders might notsometimes make what is considered a‘rational’ decision to the business communityand might make as Ian Bremmer describes,
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Low commodity prices have increased the risk ofexpropriation, political violence, sovereign debtrepayment, and have added financial stress tocommodity-related borrowers.
Despite increased risk,demand for political riskinsurance has fallen in thecommodity sector; inparticular, Insurancecarriers have seen fewersubmissions from oil andmining companies.
“market-moving (even market-crashing)economic decisions to satisfy their politicalneeds.”3
While Russia enjoys low generalgovernment debt, both in absolute terms andas a percentage of GDP, both state-ownedcorporates and banks have significant levelsof debt, which represents a contingentliability for the sovereign. The comfortablegovernment liquidity position Russia hasenjoyed thus far will be further deterioratedby low oil prices. Russian state-owned banksand corporates are experiencing additionalpressure, because they have been shut out ofinternational capital markets due to economicsanctions and, as a result they have becomeincreasingly reliant on state support.
Political violenceLow commodity prices have increased therisk of political violence in certain resource-rich countries where governments havebecome economically and politicallydependent on a steady stream of naturalresource revenues. These revenues, in turn,are often deployed in various social spendingprogrammes and subsidies that come to beconsidered a right by the local citizens. Whensuch programmes are reduced or withdrawn,violence can result, particularly in conditionsof great economic disparity or perceivedcorruption.
BMI Research has categorised Angola,Chad, Equatorial Guinea and Venezuela asbeing at ‘severe risk’ of political riskdeterioration oil prices continue to fall. Iraq,Ecuador and Algeria will also face a growingrisk of instability and unrest.
Oil glut and insurance cutsDespite increased risk, demand for politicalrisk insurance has fallen in the commoditysector; in particular, insurance carriers haveseen fewer submissions from oil and miningcompanies. The sharp decline in commodityprices has resulted in shrinking revenues andconsequently budget cuts which haveeliminated discretionary purchases such aspolitical risk insurance. Simply put, there is
less available in the corporate risk manager’sbudget to purchase political risk insurance(PRI). The decision to opt out of purchasingPRI will have long-term implications for theindustry as it is already prone to heightenedlevels of political risk.
Additionally, with the uncertain commodityprice environment and the decrease inrevenues companies have slashed spendingfor ongoing and planned projects. Inparticular, those that are expected to yieldlimited returns will be put on hold. “We’relooking at every dollar and pulling everythingback,” Anglo-American chief executive MarkCutifani said in a presentation of the miningcompany’s first-half earnings results toinvestors.4 A limited number of projects andthe overall decrease in international trade willlikely reduce the number of new transactionscoming to the political risk insurance marketwell into 2016.
ConclusionAll this serves to remind us that, as with anyeconomic phenomena, there are winners andlosers. Lower prices at the gas pump or onthe monthly energy or food bill mean savingsfor individuals and businesses around theworld as well as net-importer countries. Butfor emerging market economies that rely onprofits from crude oil and other commodities,the price can be political, and social unrest aswell as economic distress can directly affectexporters, investors, and lenders operating inthese countries. Companies that areoperating in emerging markets that do notproperly mitigate against risks that arerelated to low commodity prices will certainlyexperience increased difficulties. ■
Notes1 Bremmer, Ian, and Preston Keat. The Fat Tail: The
Power of Political Knowledge in an Uncertain World.Oxford: Oxford UP, 2010. Print.
2 IHS Global Economic and Country Risk ConferenceJune 2015
3 Bremmer, Ian, and Preston Keat. The Fat Tail: ThePower of Political Knowledge in an Uncertain World.Oxford: Oxford UP, 2010. Print.
4 http://www.wsj.com/articles/miners-shed-thousands-of-jobs-as-commodities-prices-slide-1437740084
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Berne Union 2015: Commodity volatility and political risk
Even if corporations seek to mitigate their risks bystructuring their investments through internationalguarantees or legal contracts, governments may stillexercise creeping expropriation as it is more difficult toprove in the legal system.
Uzbekistan contains some of the most promising investment opportunities in the world, and some of the most stable conditions in the CIS. However, as with all emerging markets, the key to successfully unlocking the upside is effectively to cover the downside.
No insurance company is better placed to offer you political risk insurance for trade with, investing or doing business in Uzbekistan than Uzbekinvest International Insurance Company Limited (UIIC).
The main objective of the company is to offer political risk insurance to encourage new foreign investment in the infrastructure, natural resource development and industrial production in Uzbekistan.
UIIC plays an integral part in stimulating trade and investment flow into Uzbekistan. Since its establishment, UIIC has issued 1 policies for suppliers and investors from 1 countries with total trade and investment coverage issued approximated USD mln, which by combining all co-insurance activities with AIG has encouraged more than USD 1. billion of foreign trade and investment into economy of the Republic of Uzbekistan.
UIIC shares the risks on co-insurance basis with AIG. All business insured by UIIC is accepted on its behalf by an underwriting agency, AIG Uzbekinvest Limited, established for this purpose and owned 51% by AIG and 49% by NEIIC Uzbekinvest . The use of such an agency enables the company to be established in a cost-effective way and to employ the considerable world-wide resources of AIG to assist in the production of business. Underwriting process, claim handling and other insurance issues are affected in the United Kingdom.
UIIC has access to both unrivalled local knowledge and unparalleled international expertise. As such it is the vital key to unlocking successful investment in this remarkable market.
Unlocking Uzbekistan
Uzbekinvest International Insurance Company LimitedThe AIG Building, 58 Fenchurch Street, London EC3M 4ABTel: +44 (0)20 7954 8397 web : http:// www.uiic.co.uk
Uzbekinvest International Insurance Company Limited is authorised and regulated by the UK Financial Services Authority, FRN: 202923. Registered in England company no.: 2997845.
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5.84no.: 2997
Over the past four years the global level ofrisk has been relatively stable,notwithstanding differences between theadvanced economies and the emergingmarkets: the former have been stronglyimpacted by the 2007 financial crisis, with aconsistent increase in SACE’s credit riskindicator; the latter have - on average -maintained more stable risk profiles with ahigher intra-area dispersion of risk scores.
As shown in the ‘credit risk by area’ table,the level of risk increased mainly in theadvanced economies (+10 points), that stillmaintain a high credit rating, and in theMENA area, for different reasons. In thedeveloped countries the post-global financialcrisis (GFC) adjustments are not over yet. Theemerging markets’ credit rating was furtherdeteriorated by the persisting economicuncertainty and by the reawakening ofgeopolitical risks: the Arab Spring and itsrepercussions especially on Libya, the Russia-Ukraine tensions (which will become more
visible in the 2015 CIScredit risk index), thethreat of the IslamicState in Syria and Iraq.The other developingcountries show amore restrainedworsening, but theirlevel of risk is stillsubstantial.
An analysis of themain reasons behind the claims indemnifiedover the past few years confirms the 2007financial crisis, and its long wave of effectsover corporates of any size and location, asthe main culprit. The low level of the cost offinancial indebtedness stimulated borrowersin further leveraging their capital structure,thus exposing them to the risk of not beingable to service the debt repayment in case ofunforeseen events in the implementation oftheir growth process or because of a changein the economic context. This phenomenon
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Berne Union 2015: SACE – claims and recoveries
Increasing politicalrisk will adversely impact the marketBy Valerio Ranciaro, director general at SACE SRV
Valerio Ranciaro
Credit risk by area
(0 minimum risk – 100 maximum risk)
Dispersion DispersionArea 2010 2014 Variation 2010 2014Asia 56 58 2 28 37
Advanced 16 26 10 19 36
CIS 59 62 3 17 14
LAC 59 58 -1 24 30
MENA 45 51 6 35 47
Sub-Saharan Africa 71 73 2 20 23
World 53 56 3
Source: SACE
was more evident in the case of growthstrategies financed largely through short-term debt.
More specifically, 2014 was characterisedby an absolute majority of commercial - overpolitical - events of defaults, although inperspective this balance may shift. The year2014 was marked by the re-emergence ofpolitical risks which are here to stay in thecoming years, as it will take time to resolvethe above-mentioned geopolitical tensions.
In this context, currency transfer andconvertibility risk is a major concern.Examples of T&C high risks are Venezuelaand Argentina: their respective SACE scoresare 94 and 93 (same scale as the tableabove). However, political risks should beintended in a broader way, including adverseregulatory changes and breaches of contract(for the Multilateral Investment GuaranteeAgency –MIGA, the latter ones derive fromlosses arising from a government breach orrepudiation of a contract, where the investorhas been unable to obtain an award due tothe government’s interference with thedispute-resolution mechanism or hasobtained an award but the investor has notreceived payment under such award). Asurvey conducted by MIGA and theEconomist Intelligence Unit on 459 managersof multinational companies highlights howpolitical risks are the second major constraintfor investment in developing countries, withthe three types of political risks asmentioned, representing greater concern.
According to several economic cycletheorists, 2015 could mark the beginning ofnew financial turbulences and the
characteristics of a possible new economicslowdown are already starting to show, withseveral central banks engaging in oppositedirections and increasing the volatility. TheWorld economy is being affected by theChinese financial turmoil: Beijing is copingwith its bubbles and the implications of itsstructural economic transition to aconsumption-led growth model. However,
China seems to have a rather strongresilience. The same cannot be claimed for allthe emerging countries, as some of them aremore vulnerable.
The turbulences will negatively impactcorporate creditworthiness and create a newrising tide in payment delays andinsolvencies.
In terms of remedies, the recoveryprocedures of the ECAs are ever morealigned to best practices, with severalfinancial restructurings to be managed due totheir increased involvement in financial
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According to several economic cycletheorists, 2015 could mark thebeginning of new financial turbulencesand the characteristics of a possiblenew economic slowdown are alreadystarting to show, with several centralbanks engaging in opposite directionsand increasing the volatility.
Sovereign debt in default by creditor (US$ billions)
Source: Bank of Canada
guarantees. Many ECAs are adopting a moreproactive approach, attempting to step in atthe first signs of financial distress of theircounterparts at risk. A tighter monitoring ofthe financial covenants, given its highpredictive value, is becoming increasinglycommon amongst agencies worldwide, asthey are now paying attention to a punctualtesting of the same as a measure of therelative soundness of the financial health ofthe borrower.
A consequence of this different approachis that policyholders tend to delegate, morethan before, the recovery actions to theinsurer, implicitly acknowledging a bettercapacity in managing stressed debt withrespect to the recent past. A wide network,dedicated staff and the possibility to accessprivileged channels are additional reasonsbehind this trend.
Furthermore, corporate restructurings areshowing an increasing level of complexity, ascompanies grow and more financial stake-holders are involved in multi-level capitalstructures. Multi-bank relations andsyndicated facilities provided by lenders andinvestors from many different domiciles arenow common; as a consequence, this trendwill definitely become more robust in theimmediate future.
As shown in the table below, defaults anddebt restructurings are increasingly frequentin the public finance, and they are no longeran exclusive feature of the emerging markets(the 2013 peak is mainly due to therestructuring of the debt owed by Greece,Portugal and Ireland to their EU partners).
Several international organisations,including the International Monetary Fund(IMF) and the United Nations Conference onTrade and Development (UNCTAD) areactively working in order to facilitate theresolution of future sovereign debt crises byimproving the coherence, fairness andefficiency of the relevant workouts.
A revision of the application of the pari-passu clause and a strengthening of thecollective action clauses are of paramountimportance in addressing the key problems ofthe current practice: the lack of coordinationand general rules in addressing sovereignworkouts, which creates legal incoherence
and fragmentation amongst the creditors; thepossible conflicts of interest, especially fromthose creditors who bought debt on thesecondary market at a steep discount (seethe 2014 US Supreme Court’s rulings againstArgentina and in favor of hedge funds); thelength of the restructuring process, whichfurther frustrates the results in terms ofpresent value.
The success of the work done so far by theexperts within the aforementionedinternational organisation will largely dependon the engagement of all nations inimplementing the guidelines and thenecessary reforms.
In conclusion, the landscape of creditinsurance is changing once again, togetherwith the re-emergence of political risks andmore complex restructurings (both corporateand sovereign). A more active approach fromthe ECAs in understanding these risks andmanaging complicated reorganisations will becrucial to success in a more demandingenvironment. ■
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Berne Union 2015: SACE – claims and recoveries
The turbulences will negatively impact corporatecreditworthiness andcreate a new rising tide in payment delays andinsolvencies.
The landscape of credit insurance is changing onceagain, together with the re-emergence of political risksand more complex restructurings (both corporate andsovereign). A more active approach from the ECAs inunderstanding these risks and managing complicatedreorganisations will be crucial to success in a moredemanding environment.
Local currencyfinance is oftenviewed as exotic anddifficult to executebut, with care,offshore guarantorscan enable financingbetter suited to localborrowers. GuarantCohas issued 30guarantees, the vast
majority of which are denominated in localcurrency.
There is general consensus that borrowersshould avoid currency risk, matching thecurrency of their debt and business revenues.But many struggle with this principle whenthere is such a marked interest ratedifferential between US$/euro and manyemerging market currencies. In Ghana, forexample, the differential is currently 20%+but, at the time of writing (24 Aug 2015), theGhanaian cedi had depreciated against theUS dollar by around 12% during the previous
year, over 50% in two years and nearly 80%over 10. So, depending on the time horizon,depreciation can easily wipe out anyapparent interest saving.
The problem is exacerbated becauseexchange rates are often volatile. The peak totrough movement was close to 42% in Ghanaover the last year (see graph). This volatilitycan be seriously risky and disruptive for aborrower as the timing of payments isseldom in their control. A risky borrowermeans a higher probability of default.
Case studyGuarantCo guaranteed a cedi-denominatedterm loan in Ghana in 2013. The borrowerchose the certainty of high interest rates overthe uncertainty of borrowing in US dollarswith a low nominal interest rate. Thecompany’s other borrowing in US dollars,taken at the same time, has seen principaland ongoing interest payments more thandouble in size in terms of cedi. The FXadjusted interest rate differential, whichstarted out at 21%, is now less than 14% andfalling. Even though the company’s cediinterest rate is high at 28% per annum, it isless than the all-in cost of its US dollar debtwhich is well over 30% after depreciation.
As an international guarantor with a USdollar balance sheet, the first question we areusually asked is “How do you protectyourselves from currency volatility?” Theanswer is simple. A guarantee is a contingentproduct so there is no deliverable currencyexposure unless the guarantee is called.Assuming there is no call, currency volatilityjust means the size of our recorded exposurevaries in US dollar terms. In most years ourexposure reduces as the countries weoperate in have inherently weak currencies.
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Berne Union 2015: Local currency financing
Challenges andrewards of localcurrency guaranteesBy Chris Vermont, managing director GuarantCo, Frontier Markets Fund Managers
Chris Vermont
GSH per 1 USD
(Source www.xe.com)
We maintain a capital buffer in case thereverse happens.
However, because most of our guaranteesnow crystallise in local currency, we do bearthe currency risk if a guarantee is called.While this might appear to place GuarantCoat a disadvantage, we believe, in most cases,the probability of a borrower in distressmaking good on its obligations in localcurrency is much higher than if it also has tobear the currency hit.
More challenging is working with localinstitutions that have little experience of LMAdocumentation and established internationalpractices. Local practice is often thatguarantees must be unconditional and ondemand (similar to standby letters of credit)but usually we negotiate non-accelerationwording eventually. Sometimes there areissues related to the sharing of security withlocal lenders and terms governing any suchsecurity are mainly subject to local law,which may be underdeveloped or untested.
Because local currency guarantees are stillrare, local regulators may not haveestablished rules governing offshoreguarantees or the relevant capital weighting.In most jurisdictions it is possible to obtain0% or 20% risk weighting and single obligorrelief, important in countries where localbanks are undercapitalised, but it may taketime to get a ruling. Where a country hascapital controls, such as India, special caremay be necessary to ensure recoveries canbe made in full if a guarantee is called.
A common assumption is that local banks,even with the benefit of a guarantee, cannotmatch the tenors offered by internationallenders. In fact, we have recent experience ofthe contrary. At the end of 2014 we closed aNepali rupee ($28 million equivalent)financing for a hydro-electric project wherefive local banks went out to 17 years,matching the tenor of US dollar funding fromDFI’s (needless to say there were no USdollar commercial lenders!).
We expect to close a project in Egyptshortly with 15-year Egyptian poundfinancing. Tenors for sub–Saharan Africa areperhaps the most challenging, but in certain
circumstances GuarantCo offers put optionsto lenders that help extend maturities. Thegrowth in pension funds and capital marketsin Africa, although nascent, will encouragelonger tenors in the future.
Local currency finance is definitely achallenge to the uninitiated. Combined withthe natural preference of major ECA banks tolend in euro or US dollars and a lack ofprecedents for borrowers to observe, it isunsurprising that the local currency market isyet to take off. However, GuarantCo’sexperience suggests that the challenges aremanageable and that local currency shouldplay a greater role in emerging and frontiermarkets finance. ■
GuarantCo (www.guarantco.com) is a localcurrency guarantor owned by thegovernments of the Netherlands, Sweden,Switzerland and UK, has completed 30transactions in 15 countries, close to $1 billionof capacity and is rated AA- / A1 by Fitch andMoody’s. Day-to-day management ofGuarantCo is performed by Frontier MarketsFund Managers.
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Local currency finance is definitely a challenge to the uninitiated.Combined with the natural preference ofmajor ECA banks to lendin euro or US dollars and alack of precedents forborrowers to observe, it is unsurprising that thelocal currency market isyet to take off.
Tenors for sub–Saharan Africa are perhaps the most challenging, but in certain circumstancesGuarantCo offers put options to lenders that helpextend maturities.
Q. What trends are you seeing in terms ofsovereign defaults and restructuring risks atthe current time?Maxence Mormède (MM): The recent debtcrisis and a context of loose monetarypolicies, relatively low economic growth andincreasingly indebted countries have shed anew light on investors’ approach to sovereignrisks. The recent trends in sovereign defaultand restructuring risk confirm that sovereignissuers must also be analysed in terms oftheir credit risk.
The advanced fixed income strategy uses astructured and analytical framework, calledadvanced analytics, to identify and profitfrom fundamental market inefficiencies in allmajor global fixed income market segmentsfor our investors.
Since 1999, the strategy follows a smart,active and disciplined management style todeliver superior risk-adjusted returns forglobal risk-constrained investors. In particular,in this framework, we cover 80 countries,representing more than 97% of the world GDP.
Our approach to sovereign risk analysis,and in particular to the sovereign defaultsand restructuring risks, is to assess both theability and the willingness of a sovereignissuer to repay its debt.
In our view, the first step in the analysis ofability of a sovereign to repay its debt is adebt sustainability analysis. Our approachtakes into account the dynamics of debt ofeach country over an horizon of three years,to identify the countries that can maintaintheir current debt levels and the countriesthat could further improve their debt/GDPratio to a predefined target over this period.This approach has helped us identify the
specific risks of theGreek debt as soon as2009, for example andto avoid the majorlosses many otherinvestors suffered.
More generally,over the last fewyears, a trend can benoticed to higherdebt/GDP ratio in
most developed countries – as a natural resultof the substitution of the public sector to theprivate sector following the subprime crisisand the bail out of the financial sector. Thisincrease in debt/GDP ratio has beenaccompanied by loose monetary policies andtightening spreads thus rewarding investorsless for a given risk.
For historic and regulatory reasons, manymarket participants also tend to rely onexternal rating agencies assessment of thecredit worthiness of sovereign issuers. This inturns also influences the pricing of risks in themarket and the market estimate of defaultrisks. It is therefore necessary to identifypotential rating changes early on.
Our reverse engineered-rating analysisaims to estimate the possible upgrades anddowngrades on the short-term for a givensovereign issuer according to the currentrating agencies’ methodologies. Here twomain trends have been significant over recenttimes: firstly the time lag in the downgradesof sovereigns by rating agencies (Greece,Venezuela, Ukraine etc) but also thedowngrade of developed countries untilrecently considered as not possible bymarket participants (France , USA etc).
However, the ability to repay debt is, alone,98
Berne Union 2015: Claims and default analysis
Finding extra comfortwith risk and claimsanalysisMaxence Mormède, chief investment officer (CIO) advanced fixed income* atAllianz Global Investors explains the approach taken in assessing andanalysing claims and default scenarios.
Maxence Mormède
not sufficient to estimate a sovereign issuercredit risk. For countries, the willingness torepay debt takes particular importance. Oursovereign strength indicator measures thefundamental, governance and politicalstrength to assess the risks of a sovereignissuer. In particular, recent cases such asArgentina can be better apprehendedthrough the inclusion of governance andpolitical risks in addition to purely financialkey indicators.
To conclude, we observe that the measureof credit risk of sovereign issuers must bemonitored in all dimensions to better assessthe benefit of risk-adjusted performancecontribution of such issuers in an investorportfolio.
Q. How has your own approach to handlingclaims or defaults (or the threat of suchsituations) changed in recent times?MM: The advanced fixed income team hasnever suffered any default in any of itsportfolios since its inception in 1999. Ourapproach to such risks has been to identifyand exploit market inefficiencies to thebenefit of our investors and to constantlychallenge our findings to further develop ouranalysis tools.
Within fixed income as a whole, there is astrong asymmetry in the risk-return profile ofassets. This asymmetry can be observed at asingle security level, where the upsidepotential of a bond has a natural limit –defined as the yield to maturity at time ofpurchase if the issuer does not default - butthe realised loss is greater than the expectedgain in the case of default. This asymmetrycan also be observed at an asset-class level,where, in general, risk is more stronglypenalised in bad periods than it is rewardedin good ones. As a result of this asymmetry,stringent risk management is a cornerstoneof our philosophy. We believe it is critical topay particular attention to all dimensions ofrisk in our portfolios in our pursuit ofdelivering superior risk-adjusted returns.
In the case of sovereign risk, this approachhas resulted in the recent development of oursovereign strength indicator to allow for anhomogenous comparison of the 80 countriesin our investment universe taking intoaccount their fundamental, governance andpolitical strength. With this analysis wetherefore aim to cover all dimensions of risksof a sovereign issuer that can ultimatelyaffect its default and restructuring risk, bothon an historical basis and across countries.
Q. How do private and public sector differ intheir approach?MM: From an issuer perspective, thedifferences in the analysis of risk of publicand private sectors can be apprehendedthrough the nature of their balance sheet andtheir objectives. Where private sector issuershave a governance system includingshareholders and an objective of profitmaximisation, public sector issuers rely onpublic debt and economic growth to borrowand finance national-wide fundingprogrammes of public/social interest.Therefore the approach to analysing thedefault risk of such issuers must differ.
For example, a corporate sector issuercredit worthiness will be measured by takingfundamental and business risk, but also take-over risk and the country risk. Typically thelast two dimensions do not exist in the caseof a sovereign issuer. In addition, the privatesector itself can display differencesdepending on the nature of issuers.
Our advanced analytics framework furtherdistinguishes between covered bonds,financials, corporates and securitised issuersto assess the credit risk embedded in ourinvestment universe. Typically, a bank issuermay have benefitted from a bail outpossibility in most developed countries untilrecently as opposed to the non-financialsector, whereas covered bonds are issuedunder specific regulatory frameworks.
Overall, there are significant differences inthe approach to default risk of private andpublic sectors. ■
*The advanced fixed income team is locatedin Frankfurt and consists of 15 portfoliomanagers with an average investmentexperience of 13 years. The team is headed byMaxence Mormède. The investmentprofessionals in this team are both portfoliomanagers and research analysts. Continuousresearch and development effort ensures thatwe stay at the forefront of alpha generationand risk management. The team has a depthof proven investment and quantitativemodelling experience and extensivecomplementary skills including fixed income,currency, risk management, quantitativeresearch, fiduciary management and capitalprotection.
As at June 2015, this strategy was presenton an Allianz Global Investors global level in223 funds and mandates for a total NAV ofapproximately €38.6 billion ($43.6 billion).
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ECA: Export Import Bank of Korea- KEXIM
Borrower: Pecem Steel
Deal volume: $2.1bn
Deal type: Project and Infrastructure Finance
Industry: Metals and Mining
Country: Brazil
Financial Close: 22/04/2015
Pecem SteelECA-backed loan
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ECA: Export Import Bank of KoreaKEXIM
Borrower: Dorian LPG
Deal volume: $758.1m
Deal type: Export and Agency Finance
Industry: Shipping
Country: United States
Financial Close: 23/03/2015
Dorian LPGECA-backed loan
throughout the AmericasTop 5 ECA-backed deals
ECA: SACE
Borrower: Punta Catalina
Deal volume: $632.5m
Deal type: Export and Agency Finance
Industry: Telecoms and Communications
Country: Dominican Republic
Financial Close: 10/05/2015
Punta CatalinaECA-backed loan
Metro SantiagoECA-backed loan
ECA: SACE
Borrower: Metro Santiago
Deal volume: $513.78m
Deal type: Project and Infrastructure Finance
Industry: Transport
Country: Chile
Financial Close: 20/02/2015
Royal Caribbean CruisesECA-backed loan
ECA: COFACE
Borrower: Royal Caribbean Cruises
Deal volume: $1.26bn
Deal type: Project and Infrastructure Finance
Industry: Shipping
Country: United States
Financial Close: 30/01/2015
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While whole turn-over credit insurers areaccustomed to dealing with seven to 10-yeareconomic cycles in their core OECD market,and to dealing with thousands of small claimsevery month, single situation credit andpolitical risk insurers face large andunexpected events: outside any cycle, outsideany reliable statistic.
Over the past 20 years the challengeshave not only been limited to Asia in 1997,Russia in 1998, Argentina in 2002, Venezuelaand Bolivia in 2007; Europe, Ukraine andKazakhstan in 2009, Libya and Egypt in 2011,Russia and Ukraine again in 2014. Hundredsof millions of US dollars were paid tocompensate losses made in these crises, and other losses made in less-famous crises.A significant number of corporates,commodity traders and trade financingbanks were the beneficiaries of these policiesduring this time.
Each of the now 40 insurers in this marketexperienced these crises differently – but allhave learned from the related claims.Collaborating with specialist brokers andmaking the product more tailored to theinsured’s needs, insurers learn most at thepoint at which the loss is assessed and thecustomers are indemnified accordingly.
While each insurance company might haveits own way of approaching a claim, the longtradition of syndication in single situationcredit and political risks, led by Lloyd’s of
London, has created acommon approach toclaims management.
Firstly, syndicatedpolicy wordings,drafted especially forthe insured andusually by itsspecialist broker,mean that theconditions of a valid
claim and the calculation of the loss are thesame across the insurers, irrespective of theinsurers participating in the policy.
Secondly, while each insurer is free toassess the loss himself, the commonapproach is to appoint one externalindependent specialist loss adjustor, incombination with one specialist law firm, torepresent all insurers on the risk. The lossadjustor and the lawyer will investigate,gather the information and report theirconclusions to the pool of insurers, who willin turn each make a decision regarding thevalidity of the claim and the amount of theindemnity due. The process can take severalweeks to several months, depending on thecomplexity of the claim and the availability ofthe information requested.
It is always the interest of the insurers thatthe insured is satisfied with the outcome ofthe claim process. It is an essential part of arelationship that is expected to last decades
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Berne Union 2015: Claims process for single transaction risk
Insurers look forsmoother claimsprocessingBy Olivier David, head of special products – trade credit and political risks at Atradius
Olivier David
While each insurance company might have its own wayof approaching a claim, the long tradition of syndicationin single situation credit and political risks, led byLloyd’s of London, has created a common approach toclaims management.
between the parties.This relationship is based on mutual trust:
all parties have an interest in keeping thistrust strong. It starts by understanding eachother’s expectations; in this matter, the devilis in the detail. Good faith is essential, but notalways enough. The more the individuals ineach party know one another, the more theycommunicate and clarify expectations earlyon, the better. Surprises at the time of a claimare rarely welcome.
The single situation credit and politicalrisks market offers what is called ‘non-cancellable limits’, as opposed to thecancellable limits of the traditional wholeturn-over credit insurance. While this non-cancellable aspect brings some security, italso brings particular expectations, oftenlinked to the English legal tradition (utmostgood faith, acting as un-insured…), andrepresented in a number of warranties,exclusions and conditions in the wordings.These are frequently understood withdifficulty outside of the UK.
English law will evolve in 2016 and be morefavourable to the insured, but ‘moral’expectations will remain. For example, whenthe insured is made aware of thedeterioration of the risk (by its ownintelligence or as prompted by one insurer),the insured is expected to do its utmost toavoid or limit the potential loss under thepolicy, even if this may have a negativeimpact on its overall commercial relationshipwith the country or the obligor.
Insurers will expect there to be no conflictbetween the insured’s general long-termcommercial interest and its duty under thepolicy. The insurer will want to be convincedthat the insured will do its utmost to ensurepayments are made on all insuredtransactions, contracts are completed, and noclaim is made when it can be avoided. Insurerswill cease supporting insureds that haveshown willing to lose money on a transaction(particularly if they can be indemnifiedthrough an insurance arrangement), reasoningthat there is longer-term value in the country,
or with the obligor concerned.Transparent and regular communication is
also expected. Good communication from theoutset not only helps find an acceptablesolution for both parties to a situation, but itwill often help limit or avoid future claims.Insurers often see the same risk for severalinsureds, each of which presents differentintelligence around the insurable interest (thecontract, transaction, or investment). Insuredsare valued by insurers for the quality of theircommunication during the lifetime of aninsurance policy. The way a potentiallydifficult situation is handled andcommunicated will determine any futurecollaboration with insurers, and, potentiallythe assessment of loss and indemnity.
Post claim-payment, there is still animportant expectation for the insured tosupport the (full) recovery process, especially with public/sovereign obligors.While credit insurers have collection units,export credit agencies beneficiate from their diplomats, single situation credit andpolitical risks insurers expect in most casesthat the recovery process will be led by the insured.
The ability for the insured to ‘recover’post-loss is integral to the insurer’s originalrisk appetite (and line amount); it is part ofwhat will be reflected in the policy premiumrate from which the insured benefits. For thesame obligor, the risk appetite and price maywell differ depending on the expectationsfrom the insurers on the individual insured’squality around communication, and its loss-recovery potential.
Trust and clear expectations have beenamong the most important foundation blocksof this specialist market, and will continue tobe so as it grows. The specialist credit andpolitical risk insurance market continues toplay a vital role in managing risks in a chaoticgeopolitical world and challenging economicenvironment. And we do this by enabling ourinsured clients to harness, judiciously, thetrade and investment opportunities such aworld presents. ■
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Berne Union 2015: Claims process for single transaction risk
Trust and clear expectations have been among the mostimportant foundation blocks of this specialist market, andwill continue to be so as it grows. The specialist creditand political risk insurance market continues to play avital role in managing risks in a chaotic geopolitical worldand challenging economic environment.
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The world continues to present insurers withlots of challenges. The global financial crisishit insurers hard and we are still makingstrong recoveries. In the old insurance modelwe’d have had a year of pain, then a numberof years of recovery and then the good yearsof nice stable income to ready ourselves forthe next downturn. But what we are seeingnow is almost a perfect storm – commodityprices at painful lows, ongoing geopoliticalturmoil and the markets thrown into turmoilas America decides when to raise interestrates and China’s growth materially contracts,leaving emerging markets facing their worstcrisis since 1998. So what can insurers expectto happen next?
Looking east, Ukraine is teetering on thebrink of default as its eastern territoriesremain stuck in a frozen conflict with Russia.The Russian Bear is also suffering with itseconomy in recession and no signs of the oilprice rising or sanctions being lifted in theshort term. Looking west, Brazil is no longerthe rising star – corruption scandals atPetrobras, signs of recession and Rousseff’ssecond term mired in controversy mean theengines of global growth are stalling. It lookslike we are going to be in for a bumpy ride.
The political andcredit risk insurancemarket can expect tosee a variety ofdifferent claim types –ranging from physicaldamage losses in warzones to financiallosses as companiesface liquidity crises.Emerging markets are
already seeing their currencies hit hard asinvestors start to migrate their capital inanticipation of US rate rises. Increased dollarborrowing costs will hit those producersalready suffering reduced revenues from lowcommodity prices. Insolvencies or defaultsare inevitable.
To start with, lenders will see more waiverrequests. For companies facing morechallenges there might be standstillagreements or debt restructurings. Some ofthese might end in default and insurersembarking on the claims process. One thingis for sure – insurers will face increasedadministrative burdens as problem cases gointo triage.
Hiscox set great store by who we insure. In
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Insurers see challengingtimes but alsoincreasing opportunitiesBy Victoria Padfield, Political Risk Underwriter, Hiscox London Market
Victoria Padfield
The political and credit risk insurance market canexpect to see a variety of different claim types- rangingfrom physical damage losses in war zones to financiallosses as companies face liquidity crises.
good times it is easy to lose sight of this. Inturbulent times it is important for us topartner diligent insureds who go the extramile to avert loss and leave no stoneunturned in pursuing recoveries.
We must remember these are challengingtimes for our clients too. Times when theymight rue paying for the cheapest insurancecover rather than partnering an insurer who isin it for the long haul, with a depth of claimsexperience, and not only the ability but thewillingness to pay. Paying valid claims is ouradvertisement that our product works –proving to risk managers and companyboards alike that political and credit riskinsurance is a valid risk mitigant, providingcapital relief and the ability to increase theirbusiness volumes at the same time.
Claims teams in the market areexperienced as this volatility comes relativelysoon after the global financial crisis. This willstand them in good stead and enable anyclaims to be handled efficiently and paidpromptly. One potential bottleneck is on theloss adjuster side. The loss adjuster panel ishighly experienced but are there enough ofthem to handle the claims of a private marketthat has grown by 80% since 2008? Oneother note of caution comes on therecoveries side. It is imperative that we findmore routes to aid recovery – which remainsa fundamental part of our business model.
On the flip side it is important forunderwriters to remain consistent over theeconomic cycle. Clients do not want topartner insurers who run away from adversitybut those who are prepared to support themon new deals as they maintain theirrelationships overseas. If our insureds are ableto foster long-standing trade relationshipsthat may well be the difference between usseeing claims or seeing their debts being paidahead of others. It is in our mutual interest tomake this happen.
Looking positively (down the barrel of agun perhaps!) these times are no doubt
challenging, but they can also be a rewardingreminder of why we provide this insurance.The experience shared with our clientsthrough waivers, wobbles or claims willcement our relationships further so that weare all ready to reap the rewards when globaltrade increases and those benign years of lowloss activity return. ■
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It is important for underwriters to remain consistentover the economic cycle. Clients do not want to partnerinsurers who run away from adversity but those who areprepared to support them on new deals as theymaintain their relationships overseas.
One potential bottleneckis on the loss adjuster side.The loss adjuster panel ishighly experienced but arethere enough of them tohandle the claims of aprivate market that hasgrown by 80% since2008?
Geopolitics and international conflict wereidentified by the WEF at the beginning of2015, as the primary risks facing business inthe world today. However, the fragility of therecovery following the 2008 global financialcrisis is, perhaps, of even greater concern tobusiness generally and ECAs in particular.
Global conflictCertainly, the news is dominated by stories ofthe ongoing conflicts in Russia and Ukraine,Syria, Iraq, Libya, Egypt and Yemen. It seemseven developed countries are exposed toisolated incidents of civil unrest, such as theriots in Ferguson in the US, anti-austerityprotests in Greece and lone-wolf terrorismattacks in Paris and the Bangkok bombing.The ripple effects of geopolitical turmoil arebeing felt beyond the geographies whereconflict is taking place, posing a large-scalemigrant crisis in the EU. Although there isevidence that global death rates fromviolence are decreasing, geopoliticalinstability continues to impact trade and the
ability to conductbusiness as evidencedby the increasingpurchase of politicalrisk insurance. Since2008, marketcapacity for creditand political riskinsurance hasdoubled.
Falling public confidenceIn addition we are seeing falling publicconfidence in state institutions and traditionalpolitical party arrangements as massivecorruption scandals emerge. Some examplesof this are the Lavo Jato investigations inBrazil that have threatened the stability of theRousseff government; the MalaysiaDevelopment Berhad scandal implicating topPetroSaudi officials and well-connectedMalaysian tycoons, that has led to protests inMalaysia calling for Prime Minister NajibRazak to step down; and the pro-democracyprotests in Hong Kong in 2014. For ECAs thisindicates rising non-payment risk aseconomies slow and there are contractfrustrations as governments are destabilisedor caught up in corruption investigations.
Global growth sluggish, with sharpdeceleration in the emerging worldOver the past four years, global real GDPgrowth has been remarkably stable, near2.5%. However, the composition of growthhas changed fundamentally, with a gradualacceleration among the advanced economiesand a sharp deceleration in the emergingworld. Worryingly, in the first half of 2015,there was a contraction in world trade of 2%,driven by lower consumer demand anddepressed commodity prices.
Countries that have made advances interms of reducing their debt levels, such as
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Looking at a fragileworldBy Dr Antoinette Valsamakis, director, Global Risk Consulting, IHS Economicsand Country Risk
Antoinette Valsamakis
Recent violent risk events in Mexico• Canadian mining workers kidnapped in
Guerrero state in February and March2015;
• Setting on fire of trucks owned by US oilservices companies in Tabasco in March2015;
• April 2015 torching of several trucks inroadblocks set up in Tamaulipas state;
• April 2015 robbery of at least $8.5 millionin gold from a mine in Sinaloa;
• May 2015 shooting down of a militaryhelicopter in Jalisco state;
• June 2015 execution of 10 individualswho worked for beer maker in NuevoLeon;
• June 2015 kidnapping of soft-drinkcompany employee in Guerrero state.
the US and the UK, are doing well. Europeand Japan are slower in terms of resolvingsome of these problems, and are not growingas rapidly. Many emerging markets arestruggling – Brazil, Russia, and even China areslowing down considerably. Commodityproducing countries of the Middle East, Africaand Latin America are faring very poorly witha negative outlook for growth in the short tomedium-term. Other emerging economiessuch as India, and those with dynamicmanufacturing sectors, such as Indonesia,Malaysia, Philippines and Mexico are growingmore strongly, but facing headwinds as theircurrencies weaken. Vietnam is one good
news story in the pack. With the opening ofthe economy, investment in Vietnam hassurged, exports rose by 13.6% and aprogressive trade strategy has reducedreliance on commodities. Overall worldeconomic growth is sub-par for 2015 andremains lacklustre for 2016 (see Figure 1).
Lower oil prices have negatively impactedoil producers, especially Russia, Iran andVenezuela. In the case of Russia and Iran thisis exacerbated by international sanctionspreventing access to capital markets tofinance their way out of the crisis or easily selltheir oil for export revenues (see break-outbox). Venezuela’s woes arising from the oil-price have been exacerbated by the currencycollapse and shortage of electricity due to aninability to service hydroelectric plants,leading to blackouts.
The end of the 15-year commodity super-cycle has also seen prices of raw materialsplummet (more than 36% since July 2014)and following a downward trend of four
consecutive years since 2011. IHS’s Pricingand Purchasing service points to this trend asa key indicator of a global deflationary waveconstraining the world economy.
The dollar strength is due to strongergrowth in the US (real GDP growthstrengthened from 0.6% in the first quarter to
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Figure 2: Top 20 non-payment risk countriesShort- Medium-term term
Rank Country outlook outlook1 Somalia
2 Syrian Arab Republic
3 Zimbabwe
4 Korea, Democratic People's Republic of
5 Palestinian Territory, Occupied
6 Sudan
7 Cuba
8 Eritrea
9 Haiti
10 Iraq
11 Afghanistan
12 Belarus
13 Belize
14 Burundi
15 Central African Republic
16 Congo, the Democratic Republic of the
17 Gambia
18 Greece
19 Grenada
20 Guinea
Source: IHS Sovereign Risk Service
Figure 1: Real GDP and industrial production
Source: IHS Connect
Geopolitical instabilitycontinues to impact tradeand the ability to conductbusiness as evidenced bythe increasing purchase ofpolitical risk insurance.Since 2008, marketcapacity for credit andpolitical risk insurance has doubled.
2.3% in the second quarter) with the realexchange value reaching a 12-year highagainst major currencies. US growth is drivenby consumer spending, supported by solidgains in employment, real disposable income,and asset values.
After China’s ‘devaluation’ this summer,Asian currencies in particular have fallen. Thevolatility of currencies in Asian economiesalso raises the risk of the introduction ofsudden capital controls, for example inMalaysia, where the currency has fallen badlyand there is a track record of draconiancontrols when needed (such as in 1998-99crisis). The Indonesian ringgit is the worstperforming emerging Asian currency thisyear – having shed nearly 20% of its valuesince January.
Increased sovereign riskThese factors could all impact negatively onsome countries’ payment risk. According toIHS’s Sovereign Risk Service, which rates the
short and medium-term sovereign risk of 204countries in the world (including manyemerging markets not covered by otherrating agencies), the following are the top 20
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Figure 3: Control map of Yemen (as of 20th May 2015)
Source: IHS Country Risk
Vietnam is one good news story in the pack.With the opening of theeconomy, investment inVietnam has surged,exports rose by 13.6% anda progressive tradestrategy has reducedreliance on commodities.
countries in the world with the highest non-payment risk (see Figure 2).
The real trouble is in the emerging world.The largest, fastest growing emergingmarkets in the world until recently arebeginning to stutter. Brazil was in a mildrecession last year, and a deeper recession
this year. Russia is likely to experience growthcontraction by about 5% this year, and 2%next year. China is slowing considerably andunlikely to achieve even 6.5% growth in 2015.The government has lowered the targetgrowth rate to 7%, but China is unlikely toreach that. India is doing fairly well, and willgrow faster than China for the next few years,however early expectations of high growthhave also been modified downward to justbelow 8%.
In the longer term the above trends areexacerbated by structural challenges in theglobal economy such as ageing populations,urbanisation and inadequate infrastructure.As countries grapple with their responses tothese challenges, in a world of stagnation orvery low growth, the risks for social andpolitical unrest increase.
Hot-spots to monitor going forwardOngoing conflict in the Middle East presentsemerging risks to trade routes through theSuez Canal and Bab-el-Mandeb straits and toport locations along Libya’s coast.
Suez CanalEgyptian president al-Sisi has accelerateddevelopment plans for a second Suez
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Figure 4: Libya
Source: IHS Energy Infrastructure & Markets Datab ase; IHS Country Risk
Lower oil prices havenegatively impacted oilproducers especiallyRussia, Iran andVenezuela. In the case ofRussia and Iran this isexacerbated byinternational sanctionspreventing access tocapital markets to financetheir way out of the crisisor easily sell their oil forexport revenues.
channel expansion entailing the constructionof a new 72-km section of the canal anddeepening of the existing sections. Containervolumes transported through the Suez Canal
has grown 70% between 2004 and 2014,accounting for around 7.5% of world seatrade. A reported missile attack on anEgyptian navy vessel on the 16 July 2015,claimed by Islamic State, indicates increased
capability to target warships off the coast ofSinai, compared with the short-range,inaccurate rocket-propelled grenadespreviously used against shipping using theSuez Canal.
IHS country risk analysts have identifiedshipping in the Suez Canal as an aspirationaljihadist target. While possession of suchweapons still makes it unlikely that IslamicState would sink a major vessel, the maindamage done by such attacks is likely to bepsychological, eroding commercialconfidence in the adequacy of securitymeasures, and incurring additional securitycosts, even when attacks are unsuccessful.The risk is further exacerbated by constraintson security forces’ capacity and a cash-strapped military-led government that isshowing early signs of instability.
Bab-el-MandebUp to 3.8 million barrels of oil and refinedpetroleum products pass through the Bab el-Mandeb daily in transit to Europe, Asia andthe US, making it the fourth-busiest energytransit chokepoint in the world. Numerous oilterminals and an oil pipelines, co-owned bystate companies from Egypt, Saudi Arabia,
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Figure 5: Murder hotspots in Mexico and largest year-on-year growth by location (January-July 2015)
Source: IHS Country Risk
After China’s ‘devaluation’this summer, Asiancurrencies in particularhave fallen. The volatilityof currencies in Asianeconomies also raises therisk of the introduction ofsudden capital controls.
the United Arab Emirates and Qatar, arecontrolled by the strait. At its narrowest pointthe Bab el-Mandeb is just 18 miles, limitingtanker traffic to two 2-mile-wide channels forinbound and outbound shipments. Anyclosure or perceived increased risk couldhave significant implications for global oilsupply. The war in Yemen, especially affectingAden (a strategically important port city onYemen's southern coast) is threatening todisrupt energy and other maritime tradethrough Bab-el-Mandeb. As yet, there hasbeen no direct impact on shipping throughthe strait, but this is certainly a strategicallysensitive area to be monitoring as the conflictin Yemen continues to unfold and worsen(see Figure 3).
LibyaTwo competing governments, myriad militias,and a growing Islamic State presence aretearing Libya apart. There is significant risk toenergy assets in the country. The heat-mapbelow shows areas where local oil conflictsare presenting a significant risk (see Figure 4).
Mexico –menergy reform and increasinggang-related violence and social unrestIn Mexico, energy reforms present newopportunities in the sector, bringing possibledownside risks from social unrest andincreased criminal activity. The energy reformseeks to directly address a steady decline incrude oil production posing a threat to thecountry's energy security and financialstability (as approximately 35% of the federalbudget depends on oil revenues). Violencestemming from cartel conflicts, which iscontinuing largely unabated, presents asignificant risk to attracting FDI, as well asphysical threats to assets and personneloperating in specific regions within thecountry. Politically oriented violence remainsrelatively isolated and rare, and is oftenquickly quelled by official security forces.Official statistics, however, are under-reporting murder statistics and evidenceshows that cartel turf wars continue torepresent a major threat (see Figure 5).
There is also additional risk from socialgroups within Mexico. Local groups continueto mount environmental and socialinvestment protests, blockades and legalaction and anti-government crime protests.Onshore projects are likely to facecomplicated legal negotiations over landrights as 53% of the country is undercommunal ownership (ejidos). ■
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Sanctions outlook for Iran and RussiaOngoing sanctions against Russia and thepossible lifting of sanctions against Iranare critical events that could havesignificant impact on the risk environment.
RussiaThe number of countries applyingsanctions against Russian entities hasincreased throughout 2014 and 2015. Inaddition to the EU and the United States,countries with sanctions against Russiahave expanded over the period to includeAlbania, Australia, Canada, Iceland,Liechtenstein, Japan, Norway and Ukraine.An unattractive investment environmentlost even more lustre as sanctions hit, oilprices slid and appetite for risk inemerging markets diminished.
Financial sanctions are now the mostbiting constraint for Russia, and largeRussian SOEs are unable to refinancethemselves on western capital markets.Non-payment risks to creditorsunderwriting exports to Russia’s SOEs arerising.
IranIran and the P5+1 countries reached anhistoric agreement on 14 July 2015 thatcurbs Iran's nuclear programme in returnfor sanctions relief. The UN SecurityCouncil (UNSC) unanimously voted toendorse the nuclear agreement on 20 July2015. Iran will be open for business uponIAEA-verification (due on 15 December2015) of Iran's compliance to its nuclear-related commitments and the consequentlifting of the majority of economic andfinancial EU and US extra-territorialsanctions (those affecting non-USentities). Iran will need to provide sufficienttransparency for IAEA verification of itscontinued compliance for the sanctionsrelief to remain in place.
All non-US companies will be able toengage with Iran without fear of beingsubject to residual sanctions by the US.Importantly, foreign subsidiaries of UScompanies may also obtain exemptionsfrom sanctions on a case-by-case basis,upon approval by the US Treasury. Sectors likely to benefit most as sanctionsare lifted include the obvious energysector but also financial, banking andinsurance industries, transportation and shipping.
The year 2015 has been rough for short-terminsurers, particularly for those extending highcredit volumes to emerging marketimporters. Sharp currency depreciation, risinginflation, historically low oil prices and othermacroeconomic difficulties have led to asoaring number of claims coming frombuyers in emerging countries. Under thesecircumstances, the role of export creditagencies (ECAs) covering short-term exporttransactions is becoming as important as itwas during the 2008 financial crisis.
With global trade plummeting, Korea alsoexpects around 10% decrease in exports forthe year. However, this year’s export decline isdifferent from the one we saw during therecession of 2008 which was prompted bythe credit crunch, and in which ECA coverhelped ensure deals were done.
A number of intertwining factors havecome into play to complicate the currentdownturn. These include; a drop in oil prices,currency depreciation in emerging markets,and an economic slump in China, to name afew. Here, I would like to share a few of themajor challenges that K-sure has encounteredthis year.
The first challenge is a changing role ofcredit insurers from being insurers to being
managers. A striking
phenomenon in theshort-term business inrecent years is thefact that low-riskprofile importers arein trouble because ofnegativemacroeconomicfactors such as
currency depreciation, interest rate hikes, andsluggish local demands. Those buyers feelthat they are not to blame for defaults butpoint to an uncontrollable externalenvironment.
For these supposedly ‘innocent’ importers,exporters ask ECAs to play a more active rolein restructuring troubled deals, rather thanmaking claim payments since exporters feelthat even the troubled importers are essentialfor the success of their businesses and wantto continue dealing with them.
Restructuring packagesWe at K-sure have settled variousrestructuring deals in 2015. The typicalrestructuring package involves debt paymentextensions on top of setting up of new credit
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The changing role ofST credit insurers inthe shrinking marketSeung Dal Baek, K-sure’s senior director of short-term business department,reviews how insurers are coping with new demands from corporates in adifficult market.
Seung Dal Baek
The role of credit insurers is transforming into amanager of national trade networks. From this brandnew perspective, we need to try changing our businessmodel from the one of a passive insurer to that of aproactive manager.
lines for importers and exporters to maintainbusiness. It is certain that creditors would nothave agreed to restructuring debt had K-surenot been involved. This is why I feel that therole of credit insurers is transforming into amanager of national trade networks. Fromthis brand new perspective, we need to trychanging our business model from the one ofa passive insurer to that of a proactivemanager.
The second challenge is that exporters areincreasingly becoming selective when theyapply for credit insurance cover. Exporters nolonger want to include low-risk buyers in theirinsurance portfolios. This is probably due to awish to reduce the cost of premiums asmargins decrease in a tough economy.
Korean conglomerates are particularlyeager to change their insurance portfoliosthat traditionally covered a wide range ofimporters with varied credit characteristics toones that are more focused on high-riskprofile importers. This being the case, pricingand underwriting are becoming morecomplicated. I feel that the exporters’ loyaltyto the insurer falls as the size of portfoliodecreases. When the size of insuranceportfolio is very large, the insured would bereluctant to change the insurer because of aninvisible high exit cost. With a minimumportfolio, however, it would be easy for theinsured to dine and dash. Thus, how to pricein this issue in the premium calculationsystem is high on the insurers’ agenda.
In addition, I see some paradoxicalphenomena in the conventional premiumsystem where premiums and revenuesproportionally match. The reality is thatclaims increase as revenues decrease, as wehave seen in 2015. This is why I believe thatcredit insurers should modify the currentrevenue-based premium calculation system.By doing so, we may curb the exporters’move to reduce the size of their portfolios.
The third challenge is that the number ofstructured deals is increasing in short-term
insurance as we see in the medium and long-term (MLT) business.
We at K-sure have sought to findalternative ways of underwriting in order toaccommodate the exporters’ demand as thesituation of buyers and buyers’ countriesbecame unstable. For example, we havestructured deals to enhance the recoveryprobability in claim payment cases. We havealso approved several deals in countries witha high currency risk, utilising liens on localcurrency deposit accounts, which will helpadjust the balance according to the prevailingexchange rate. We also designed deals inwhich the account receivables of theimporter would set-off their accountpayables to the exporter should a claimoccurs.
I was struck by a recent question by anexecutive from one of our clientele. He said tome: “I don’t think we need credit insuranceany more. You pay claims with the premium Ipaid. What is your value to us?”
Even though I told him he could not simplyignore the credit insurance industry and thathe needs to try to understand why theindustry works in spite of such challenges, Iwas unhappy about my answer. In my head avoice yelled that I needed to find a morepersuasive answer.
One thing is for sure: the exporters’demand on credit insurers is rapidly changingas traditional and mediocre policies will nolonger work. ■
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We at K-sure have settled various restructuring deals in2015. The typical restructuring package involves debtpayment extensions on top of setting up of new creditlines for importers and exporters to maintain business.It is certain that creditors would not have agreed torestructuring had K-sure not been involved.
Exporters’ demand oncredit insurers is rapidlychanging as traditionaland mediocre policies willno longer work.
If we think about academic research, weoften think about theory development andtesting with no or little concern for impact onthe real world. We sometimes believe thatresearchers are university-based and have noexperience with practical issues, and thattheir sole intention is to contribute toacademic knowledge. And we also mightimagine a grey-haired professor hunkeringover dusty books in his small study at amedieval university college in England. But isthis the reality of business research in the 21stcentury? Clearly, it is not. Quite the contrary,there are numerous and highly relevantresearch approaches which aim to combinerigour and relevance, and which focus onglobal trade, export credit and the demandfor insurance.
A multi-faceted discussionDuring the last couple of years, scholars haveinvestigated the role and relevance of tradefinance, export credits and credit insuranceprogrammes. As discussed below, thisincludes several studies on trade and exportfinance instruments in general, or regardinglegal, financial, regulatory and environmentalaspects. There is also a growing number ofpublications on practitioners’ aspects offinancing exports and insuring foreign directinvestment.
Recently, a number of authors haveconcentrated on the role of export promotionduring and after the 2008-2009 financialcrisis as well as the euro debt crisis. Andseveral academics and practitioners justshared their views on global standards for
export credit andpolitical risk insurancein Global Policy’s newpublication TheFuture of ForeignTrade Support.
More generally,insurance demand hasbeen a major researcharea during the lastcouple of decades.
This includes the vital role of firms’ demandfor insurance as a substantial aspect ofcorporate risk management. One of the firstanalyses of a set of incentives for corporatedemand for insurance consistent with themodern theory of finance was presentedsome 30 years ago by David Mayers andClifford W Smith. Since then, several authorshave investigated factors affecting corporateinsurance demand and provided empiricalstudies.
To date, it is the consensus view of allrelevant authors such as Robert Hoyt, SimoneKrummaker, Laureen Regan or NobuyoshiYamori that insurance plays an important rolefor companies. There is also a generalconsensus that there are several relevantdeterminants of corporate insurancebehaviour in the area of export credit andpolitical risk insurance.
Economics and financing of global tradeThe role of trade in the global economy aswell as the relationship between trade policyand economic development have been
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Why academicresearch matters forinsurance practitionersBy Professor Andreas Klasen, Offenburg University
Andreas Klasen
extensively discussed in economics. Andalthough there are still many controversialaspects in the debate, there have beenimmensely useful contributions forpolicymakers such as Nobel laureate andPrinceton Professor Paul Krugman’s ‘NewTrade Theory’. Numerous models ofinternational trade but also governmentpolicies fostering economic developmentincorporate the approach of economies ofscale in production combined with networkeffects and a preference for diversity inconsumption.
In the context of financing global trade, anumber of studies discuss the relevance ofgovernment financing and insuranceinstruments in a macroeconomic context.Scholars have used data to establish the linkbetween trade finance and global trade. Forexample, economic counsellor Marc Auboinfrom the World Trade Organisation (WTO)analyses the effect of trade credit on tradethrough a whole cycle employing BerneUnion data on export credit insurance.
A further practice-oriented researchquestion is about firms and credit constraintsalong the global value chain. Together withZhihong Yu from Nottingham University,Stanford Professor Kalina Manova shows inthe first Berne Union Working Paper thatglobal supply networks may enable morefirms in developing countries to share in thegains from trade.
Bilkent University Professor Banu Demirunderlines the importance of financialmarkets in facilitating international trade,especially in developing countries. Towardspractitioners, she argues that a potentialremedy is to extend short-term credit lines toexporters through Exim banks with a view tomeeting their working capital needs. Anotherremedy would be to create new instrumentslinked to letters of credit (LCs) which can beused by beneficiary exporters to obtainshort-term financing in their home countries.
Demand for export credit andpolitical risk insuranceErdal Yalcin and his colleagues from Munich’sifo Center for International Economics giveevidence on the effect of export creditinsurance with an evaluation of Germany’sexport credit agency (ECA). With anempirical analysis, they establish a causalrelationship between export creditguarantees and employment and show thatECAs have a particularly strong export-enhancing effect. With Yalcin’s analysis,policy makers and government authoritiesare able to better understand how to createand safeguard export-related jobs in thenational economy.
Another example is the evidencepresented by Bundesbank economist MichaelWedow and his colleagues with regard to therelationship between political risk and exportpromotion. They employ an empirical tradegravity model showing that firms’ exportactivities are limited in the absence ofinsurance provision. And Amparo San JoséRiestra presented in her extensive studyundertaken at the Centre for European PolicyStudies some years ago that credit insuranceis a competitive tool, in particular for smalland medium-sized enterprises (SMEs). With apractitioner-oriented approach, she alsoshows why export credit insurance is animportant instrument for exporters’ balancesheet protection.
One of my recent research papersdiscusses evidence that firm-related factorssuch as firm size, cash flow and export quotacan significantly influence the demand forexport credit insurance. The findings of theempirical estimation of a multiple linearregression model indicate that exportersvalue credit insurance, in particular in themanufacturing industry. Credit insurers andpolicy makers can use these results, forexample for their strategic management. For
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Scholars have used data toestablish the link betweentrade finance and globaltrade. For example,economic counsellor MarcAuboin from the WorldTrade Organisation (WTO)analyses the effect oftrade credit on tradethrough a whole cycleemploying Berne Uniondata on export creditinsurance.
governments it is worth assessing if financingand insurance products as well as coverpolicies and conditions are adequate toaccommodate demand from companies, inparticular if they lack in large corporatefinance departments. Export credit agenciescan also evaluate if an additional allocation ofresources to claims administration, losscontrol and other functions can be expandedin order to better support exporters.
Political, legal and environmentalaspectsPolitical aspects have always been highlyrelevant in the context of export credit andpolitical risk insurance. What is the impact ofECAs and investment guarantee programmeson the domestic economy? Does exportpromotion undermine the multilateral tradesystem? And what about subsidies and WTOrules and regulations? Vlerick Professor FilipAbraham and Gerda Dewit, from the NationalUniversity of Ireland, discuss that exportinsurance provided by governments is moredriven by a broad range of policy objectivesthan purely insurance principles.
However, one important finding from theirresearch is that export promotion does notnecessarily imply trade distortion. And afurther outcome of Abraham and Dewit’stheoretical model some years ago was thatthe objective of risk reduction can beachieved without subsidisation by charging afair premium. Combining political discussionsand legal aspects, Dominic Coppensdiscusses the degree of policy space theWTO leaves governments to support exportcredits. And together with his colleague ToddFriedbacher from Sidley, he turns theattention to the fact that export creditsupport might not be WTO-consistent, evenwhere it conforms to the OECDArrangement.
The discussion about a consolidated and
comprehensive set of multilateral disciplineson export credit and political risk support is ahighly relevant field today. In addition topolitical and legal questions, this also includesaspects of a sustainable behaviour. Followinga controversial debate about the OECDArrangement and state export creditguarantee support for dams (e.g. NicholasHildyard) or the role of export credit agenciesand developing country debt (e.g. OygunnSundsbo) in the past, there are now oftennew directions: export credit support andclimate finance as well as setting globalstandards for export credit and political riskinsurance. These are key questions for thefuture. And although many practitioners fromorganisations such as the Organisation forEconomic Co-operation and Development(OECD) and the Berne Union are driving thedebate, there are valuable academiccontributions.
For example, Scott Hickie examines therising importance of ECAs in internationalfinancing as well as the implications forclimate change mitigation and ecologicallysustainable development. Andrea Saldarriagaand Andrea Shemberg from the LondonSchool of Economics and Political Scienceargue that governments should drive theinclusion of global standards on social andhuman rights. To build a global consensus,their recommendation is to demonstrate anddisseminate good practices by spearheadingempirical and case study research todocument the impact of social and humanrights policies. From their point of view, thiswill support governments to overcomearguments that social and human rightsstandards will hinder the competitiveness ofECAs and impose unnecessary burdens.
The role of the Berne UnionThere are numerous other examples whyresearch matters for trade and insurance
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Amparo San José Riestra presented in her extensivestudy undertaken at the Centre for European PolicyStudies some years ago that credit insurance is acompetitive tool, in particular for small and medium-sized enterprises (SMEs). With a practitioner-orientedapproach, she also shows why export credit insurance is an important instrument for exporters’ balance sheet protection.
practitioners. The Berne Union already usesthe positive impact of academic contributionto knowledge and practice, in particular bysuccessfully establishing the Berne UnionWorking Paper Series. The second BerneUnion Working Paper, by Giorgio BarbaNavaretti from the University of Milan and hiscolleagues, shows why productive exportersmake a (big) difference. Berne Union WorkingPaper number three from Yalcin focuses onpolitical risk insurance and questions the roleof state-backed investment guarantees, andhow they shape foreign direct investment.Berne Union Working Paper number four byFriederike Niepmann and Tim Schmidt-Eisenlohr, from the Federal Reserve Board,looks at international trade, risk and the roleof banks. The authors explore when firms usespecial trade finance products from banks.They provide a model that rationalisesempirical findings and discuss implications.
The views of private and public insurersand the future of export credit andinvestment insurance are currently exploredin a qualitative study which I conduct,together with Henning Meyer from theLondon School of Economics and PoliticalScience and Simone Krummaker from theUniversity of Westminster. This research isbased on interviews with CEOs andmanaging directors from the Berne Unionand the Prague Club. Key topics include themost challenging topics for the industry andpolicy makers, further factors driving thedemand for insurance or how insurers usedigital to make big decisions. The aim is tofind practical answers to the industry’squestions.
Contribution to practiceAs a conclusion, research has importantimplications for a number of parties involvedin export credit and political risk insurance.
This includes export credit agencies, policymakers and governments as well as banksand exporters. For example, ECAs can linktheir strategic aims and policies with relevantfactors for exporters. This might include thequestion if there should be a stronger focusupon closely held or small corporations. Inaddition, evidence regarding economies ofscale linked with a provision of real servicesmight not only be an important contributionto promote SMEs. It can even be anadditional source of income.
Research also raises important issues forpolicy makers and government authorities.More specific SME support with highervolumes might be necessary. Becauseresearch findings indicate that companieswith a higher export quota have a higherdemand, non-traditional buyers in developingmarkets perhaps should be supported, or adifferent assumption of risk for morechallenging buyers and foreign countries canbe necessary. And as there is a lack ofguidance in many companies with regard tothe decision to purchase insurance, exporters’policies and guidelines based on empiricalevidence can show how to use export creditand political risk insurance as a strategic riskmanagement tool. ■
Andreas Klasen is Professor of InternationalBusiness at Offenburg University and Fellowat Durham University. Until 2014, he served asvice president of the Berne Union.
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For governments it is worth assessing if financing andinsurance products as well as cover policies andconditions are adequate to accommodate demand from companies, in particular if they lack in largecorporate finance departments. Export credit agencies can also evaluate if an additional allocation ofresources to claims administration, loss control andother functions can be expanded in order to bettersupport exporters.
In the years following the 2007-08 financialcrisis, UK Export Finance (UKEF) watchedthe increased use of direct lending schemesby ECAs with interest. US Ex-Im’s direct loanactivity, for example, grew significantlyfollowing the economic downturn, peaking in2012 with $16 billion of direct loan supportdistributed among 18 transactions. Thisincluded a direct loan for the SadaraPetrochemical complex project, for which wewere a pure cover guarantor.
In last year’s Berne Union Yearbook, ourchief executive noted the expanded role forECAs in enabling liquidity since the 2007-08financial crisis. He observed that the ability ofECAs to fund directly had becomeincreasingly important, due to the constraintson commercial lending activity as a result ofbank leverage ratios, and the introduction ofregulations that could inhibit banks fromholding long-dated assets.
The flexibility provided by a direct lendingcapability was an illustration for us of therequirement for an ECA to be able to respondquickly, as US Ex-Im had, to changingconditions through the economic cycle – anability we lacked during the 2007-08economic downturn. This requirementformed the basis of our three-year businessplan, presented in 2014. It expanded on theidea of what a through-the-cycle ECA wouldneed, emphasising the need to maintain acompetitive offering at the same time asbeing agile and adaptable, to tailor oursupport to reflect prevailing economicconditions and export opportunities.
This approach doesnot necessarily haveto be at odds with ourmandate to‘complement notcompete’ with privatesector provision. Infact for us the newplan has meant closerpartnerships with awider range of private
sector providers to make sure all avenues ofpotential support can be understood andexplored.
First stepsBefore launching the facility we operatetoday, we experimented with a backstoplending facility, designed to be used only at atime of severe capital constraints. For thisfacility, loans would have been infrequent andwould have been administered in-house. Thefacility was announced in late 2012 as a pilotto explore the response from banks. At theend of the pilot period it was independentlyreviewed by external consultants.
The result of the pilot was a consensusthat to offer UK exporters a level playingfield, a permanent scheme offered at theOECD’s Commercial Interest Reference Rates(CIRR) was required. A scheme that fixesrates at CIRR was particularly attractive as wehave not offered an interest make-up productsince the closure of our fixed-rate exportfinancing scheme in 2012.
The challenge for us as an organisation
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Joining the directlendersBy Margaret Eyres, UK Export Finance’s head of direct lending
Margaret Eyres
The ability of ECAs to fund directly has becomeincreasingly important, due to the constraints oncommercial lending activity as a result of bank leverageratios, and the introduction of regulations that couldinhibit banks from holding long-dated assets.
was how to administer the scheme. UKEF is aministerial department of the UK governmentand historically a pure cover ECA. It is not abank and it is not constituted to administer ahigh volume of trade finance loans.Furthermore the UK government did nothave a suitable funding vehicle and it did notwant to delay the implementation while itbuilt a SEK-style export lending arm. So howto administer the first direct loans in UKEF’snear 100-year history?
Taking shapeThe decision was taken to form a panel ofbanks, each with the ability to act as agentfor us on direct lending transactions. Thisapproach promised the advantage of beingable to use the scope and reach of largebanks to promote the facility, while at thesame time being able to include smallerlocal/regional banks in key markets, or non-bank institutions, which may be incentivisedto work on smaller transactions withborrowers which are not targeted byinternational banks.
A look at the current panel of agents(found on gov.uk/uk-export-finance) showsthat we succeeded in meeting this vision,with the likes of Deutsche Bank, HSBC andStandard Chartered joined by Garanti Bank ofTurkey, Ecobank of Nigeria and Crown AgentsBank among the 20-strong panel. The spreadof panel members in terms of size, geographyand sectors has reassured us this was theright approach for us, based as we are in oneof the world’s financial capitals. The panel ofagents can be expanded if it is necessary foroperational needs and has proved a usefulconduit for increasing the strength of ourpartnerships with banks.
Historic first loanOur first direct loan was announced byChancellor George Osborne in October 2014.It was a 50/50 split between direct lendingand pure cover, totalling $110 million for theDubai World Trade Centre in Dubai, whichengaged Carillion for the construction of ahotel, office block and associatedinfrastructure. Three further transactions haveproceeded since then, bringing the total valueof loans to just under £200 million ($310million).
We operate with an allocation of £3 billion($4.65 billion) of public funds that can be putat risk by the facility. But the allocation is onlya limit on amounts-at-risk, so funds becomingavailable again from loan repayments can be
re-lent within this overall allocation. Thiscould prove important, with a pipeline andenquiry flow that have a cumulative value ofover £3 billion.
Otherwise the facility works within thenormal parameters of our support, includingour foreign content rules (minimum 20% UKcontent) and our recently amended statutorypowers. These amended powers could proveimportant in providing us with greaterflexibility.
Before May 2015 our support had to be fora specific single UK export contract. Thelegislation has now been enhanced to provideus with the ability to meet the financingpreferences of overseas buyers who mightwish to use an integrated finance packagefrom us that includes both UK primecontractors and parallel contracts or UKsubcontracts through non-UK contractors.
Looking aheadSo what is next? Local currencies are on ourradar, with our recent completion of our firstguarantee for a renminbi loan. The panel
arrangements in place for our direct lendingfacility potentially invite a closer look at thepossibility of direct lending in localcurrencies, although there are plenty ofhurdles in the path of this ambition.
We are also contributing advice to theUK’s Department of InternationalDevelopment (DFID) on developing the ideaof a UK concessional export credit financeprogramme, which could in time lead todirect loans blended with 35% aid grants(that is assuming UK companies contributesupplies; DFID have stated that any facilitywould be untied).
But the immediate task at hand, for arelatively new team at UKEF, is to meet thegrowing expectations for UKEF’s directlending capability. With an imminent increasein loans to be drawn, the signs are positive. ■
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Our first direct loan was … a 50/50 splitbetween direct lending and pure cover,totalling $110 million for the DubaiWorld Trade Centre in Dubai, whichengaged Carillion for the constructionof a hotel, office block and associatedinfrastructure.
The valley on the shores of the saline LakeTurkana in northern Kenya is sometimesdescribed as extraterrestrial. The area is adesert, dry and sparsely populated, mostly bynomadic tribes. Occasional dwarf shrubs aretestament to the frequent spells of drought ina landscape dominated by sand and rocks,the home of scorpions and vipers. To mostpeople, this is indeed an unwelcoming place.
Not so, if you seek to develop a wind farm.The desert valley lies between two tallmountain ranges and is swept by strong,consistent and unusually predictable winds. Infact, studies have shown that this is one ofthe best sites in the world for windmills.Accordingly, construction has now started forThe Lake Turkana Wind Power project. From2017, no less than 365 wind turbines willsupply more than two million people withrenewable energy in what will be the largestsingle private investment in the history ofKenya.
The Kenyan wind farm is just one amongmany climate-friendly investments currentlybeing made across the globe. In 2013, annualglobal climate finance flows totalledapproximately $331 billion, according to TheGlobal Landscape of Climate Finance 2014from the analysts at the Climate PolicyInitiative (CPI). However, to keep the globaltemperature increase below 2° celsius, theInternational Energy Agency (IEA) hasestimated that we need low-carboninvestments of an additional $1,100 billionfrom now until 2050 in the energy sectoralone. The world will need access to muchmore climate finance than what is currently
available.Today, 40% of
climate finance comesfrom public sourcesand 60% from privatesources, according tothe CPI. As the worldslowly works its wayout of the financialcrisis, it is clear thatthe majority of new
funds will have to come from privateinvestors. There is no extra money left ingovernment purses.
Instead, Denmark’s EKF and many othersadvocate a new division of labour wherepublic institutions focus less on supplyingcapital and more on alleviating risk. In otherwords, exactly the home turf of export creditagencies. Going forward, public institutionswill continue to play a key part in climatefinance, but their role is likely to evolve intomobilising new sources of funding by‘crowding in’ private investment.
ECAs can bridge the gapEKF has been active in climate finance formore than a decade, first and foremost as apartner to Denmark’s world-leading windindustry led by Vestas and Siemens. Morethan 60% of EKF’s total guarantees can beclassified as climate finance. Predominantlywind turbines, but recently also a growingportfolio of biomass power plants.
Our experience shows that export creditagencies can play a central role. For example,export credit agencies are very well suited to
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Climate finance: A perfect fit for ECAsBy Jan Vassard, deputy CEO, and Ole Lindhardt, chief communicationsconsultant, EKF, Denmark’s Export Credit Agency
Jan Vassard
Denmark’s EKF and many others advocate a newdivision of labour where public institutions focus less onsupplying capital and more on alleviating risk. In otherwords, exactly the home turf of export credit agencies.
help bridge the gap between national,regional and multilateral development bankson the one hand and private investors on theother. The Lake Turkana Wind Power projectis a case in point.
The €625 million ($698.7 million) windfarm will add almost 20% to Kenya’s currentlyinstalled power-generating capacity. Butsuccess was not born overnight. In fact, ittook eight years from the initial idea tofinancial close in 2014. The financing structure(here in simplified form) fully illustrates thenecessity of public and private cooperation.
The equity group – providingapproximately €150 million ($167.7 million) –includes KP&P Africa (a consortium of Dutchand Kenyan businessmen), the energycompany Aldwych International, three Nordicdevelopment finance institutions, and Vestas,the Danish wind turbine manufacturer.
The majority of the senior debt is providedby the African Development Bank (AfDB) andthe European Investment Bank (EIB), withEKF covering tranches of approximately €125million ($139.7 million). A French, a Dutch,and an African regional development financeinstitution are part of the lender group too.
New solutions neededAs outlined above, close cooperationbetween public and private actors isindispensable. But to multiply climateinvestments in developing countries withsubstantial political and commercial risk, itwill also be necessary to develop entirely newfinancing solutions.
EKF is part of The Global Innovation Labfor Climate Finance – an international groupof policy makers, financial experts,practitioners, and project developers workingto identify and recommend new climatefinance instruments. The group’s efforts haveso far resulted in four new initiatives,including:
The Long-Term FX Risk Managementinstrument In countries with underdevelopedcapital markets, the long payback periodsinvolved with renewable energy investmentsmean changes in the value of a currency of50% or more are not uncommon. Currencyrisk of this magnitude combined withsignificant interest rate risk can spell disasterfor a project.
Using a range of currency and interest rateswaps, the Long-Term FX Risk Managementinstrument aims to provide the tools forinvestors to lock-in long-term finance in localcurrency. The International Finance
Corporation (IFC) and the TCX InvestmentManagement Company is working togetherto implement a pilot project.
The Climate Development & FinanceFacility Renewable energy projects requirehigh amounts of capital expenditure. Theinitial planning and permitting phase,including conducting environmental andsocial impact assessments, can take years, notleast in developing countries. Because of this,debt costs at construction can have adisproportionate effect on projects’ financialviability.
The Climate Development & FinanceFacility aims to untangle this Gordian knot bydividing the financing of renewable projectsinto three separate stages with different riskprofiles suitable for different types ofinvestors. Stage One (early-stagedevelopment) will include a high proportionof non-repayable funds from publicdevelopment finance institutions. Stage Two(construction) is based on a mix of publicand private investment, while Stage Three(refinancing) is designed to attract mostlyprivate capital from institutional investors,such as pension funds, seeking long-term,low-risk investments.
A pilot project is being taken forward byFMO, the Netherlands Development FinanceCompany.
ConclusionThe world will need access to much moreclimate financing. Public institutions willcontinue to play an important part, but arelikely to focus more on alleviating risk in orderto attract new sources of private capital. Thisis a role that comes very naturally to ECAs.ECAs can further contribute to climatefinance through innovation in financialinstruments. ■
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To multiply climateinvestments in developingcountries with substantialpolitical and commercialrisk, it will also benecessary to developentirely new financingsolutions.
Exporters – large, medium, small or tiny –play a vital role in any economy. Creating abusiness-friendly environment for thesecompanies to help increase exports is criticalfor any country. ECGC, in its role as thenational underwriter for exports, iscommitted to help exporters achieve theirexport goals. In this context ECGC hasintroduced several features to its existingpolicies, keeping in mind the interest of alltypes and sizes of exporters.
Our vanilla product is the Whole TurnoverShipment Comprehensive Risks policy, adeclaration-based policy that covers all theexports made on credit terms over a year,which continues to be the most popularproduct for ECGC’s short-term business.There is a basket of other products to suit thevarying needs of both MSME (micro, smalland medium-sized enterprise) exporters andtheir larger counterparts. There are productsfor a single transaction, for a single contractor for a single buyer. There are products tocover exports made on a consignment basis,in which goods would be stored inwarehouses in a foreign country to be sold toultimate buyers by the exporter’s ownsubsidiary or by a designated agent. Thereare also specific products to cover servicesrendered by the Indian exporters. In all, thereare 14 such ‘off-the-shelf’ products thatexporters can choose from according to theirvarying requirements.
Popular featuresSpecial attention is warranted for exposure-based policies, where premium and claimsare decided on the basis of exposure and notthe actual turnover, either for a single buyer
or for multiple buyers.Giving due respect tolarge exporters’internal underwritingsystems, ECGC hasintroduced features inits policies wherethese qualifyingexporters can gethigher discretionarypowers to exercise. In
order to handle a large number of shipmentsand to simplify the policy management forlarge exporters, exporters opt for exposure-based policies where premium is charged onthe exposure and no declarations arerequired to be submitted. The exposurebased policies are gaining popularity, withapproximately half the premium in the sectorcoming from such policies.
The requirements of policy holders areusually met by ECGC’s wide range of covers.However, the changing needs of exporterscall for new covers to be designed to meettheir specific requirements. ECGC also offersCustomer Specific Policies for top-ratedcustomers with an acceptable losspercentage and a minimum premiumrequirement. Customisation is carried out bymodifying selected features of a standardproduct or by combining the features of twoor more products. The requirements ofexisting or prospective customers fulfillingthe criteria are met by issuing such tailor-made products, keeping in mind theprinciples of insurance, regulatoryrequirements and the value of the customerfor ECGC. The performance under thesetailor-made products is closely monitored.122
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Key policyholders:exploring the ECGCapproach Geetha Muralidhar, chairman and managing director of ECGC, explains thevarious policies of the Indian export credit agency.
Geetha Muralidhar
During the 2014-15 financial year, there were91 customised policies issued to policyholderspaying sizeable premiums, policies withwhich ECGC has experienced a comfortableclaim-to-premium ratio of around 29%.
For customers with whom ECGC hassatisfactory previous experiences, incentivesare offered by way of a No-Claims Bonus(NCB), which can be for up to 50%. Inaddition, policyholders who pay a premiumabove a certain level are offered turnover andvolume discounts. Further, customers whooffer to pay the entire annual premium inadvance are offered an upfront discount. Inaddition to all the above, in exceptional casesa special discount is also offered. Togetherwith NCB, the total discount can go up toeven 70% of standard rates.
The regulatory authority for the insuranceindustry in India, IRDAI (Insurance Regulatoryand Development Authority of India), isrequired to approve each product before it isoffered to policyholders. A furtherrequirement is that each product should beself-sustaining in nature over a period of time,with no cross subsidisation from otherproducts. Each product is evaluated by theappointed actuary, and its performanceassessed periodically to carry out promptcorrective measures if required.
Customer segmentationa) On the basis of premiumMajor customers that significantly contributeto premium income are always a chiefconsideration. Policy holders who paid anannual premium of $10,000 or aboveconstitute around 15% of the total customerbase. It is interesting to note that asubstantial 64% of these customers belong tothe MSME category. However, it should benoted that MSME exporters represent 85% ofthe total policyholder base. It is also observedthat 82% of these exporters hold declaration-based policies, 35% hold exposure-basedpolicies, with 17% also having declaration-based policies. These major customerscontributed around 70% of the short-termpremium income, while claims of thesecustomers also stood at 70% of the totalclaim payment.
Out of these major customers, the key 65exporters each paid a premium of $100,000or above.
b) On the basis of liabilityDuring the year, there were 1460 exportersholding large value policies with Maximum
Liability/Aggregate Loss Limit (ML/ALL) of $1million or above, either as a single cover or acombination of multiple covers. Some ofthese policies may not have contributedsizeable premiums, either due to the low-riskprofile of the transactions or due to the shortduration of the selected transactions.Nevertheless, ECGC’s considers thesecustomers are extremely important. Sevenexporters were holding policies of $1 millionor above with premium incomes below$100,000, but were still considered keycustomers.
Large corporates can usually commandsuperior payment terms from their overseasbuyers; such as letters of credit from reputedbanks, which are considered to be of low risk.Some large companies have their ownsubsidiaries or offices in overseas countries,which receive their major exports. Therequirement of ECGC cover in such instancesis limited. These customers, though they maynot qualify as major premium payers,nonetheless would be considered as keycustomers, taking into account their profile.
c) On the basis of potentialFocus is given on professionally managedmid-sized companies that are in a growingphase, with good promoters, healthyfinancials and with considerable futurepotential. ECGC nurtures such companies byoffering them suitable products. Incomparison of premium contribution over thelast three years, there were 16 exporters thathad grown 100% more with an averageannual premium payment of $100,000 orabove.
d) On the basis of experienceSmall companies that have been with ECGCfor a long time, and with whom ECGC hasgood experience, are given due importanceeven though they may otherwise not qualifyas key customers. An analysis of the claim-to-premium ratio over the last three years showsthat there were 72 exporters whose average
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The changing needs ofexporters call for newcovers to be designed tomeet their specificrequirements.
annual premium was $50,000 or above, andwhose claim-to-premium ratio was zero.These exporters are also included in the list ofkey customers.
Servicing of key customersIn all, there are 160 key customers. Some ofthem hold declaration-based policies, whichrequire premiums to be paid on the shipmentvalue every month. The rate of the premiumdepends on the country grouping, the termsof payment and the discount offered to thecustomer. These policies generally requirecredit limits to be fixed on each buyer forcovering commercial risks. Credit limits arefixed on a revolving basis and ECGC’s liabilityon each buyer is restricted to this limit.
Most of the key customers hold exposure-based policies. Exposure-based policies canbe issued for a single buyer or for multiplebuyers. For the Single Buyer Exposure Policy(SBEP), a Loss Limit (LL) is fixed on eachbuyer, which is the amount up to whichECGC’s liability is attracted. Premium needsto be paid on the amount of Loss Limit andnot on the turnover. Separate policies areissued for each buyer.
The Multi-Buyer Exposure Policy (MBEP) isan exposure based whole turnover policy.Each policy has an Aggregate Loss Limit(ALL), which is the maximum amount ofliability which ECGC can take for all buyersunder the policy. Single Loss Limit (SLL) onany buyer is fixed at 10% of the ALL. If ahigher exposure is required, an enhanced SLLof up to 25% will be accommodated in thesame policy with additional premium. If theexposure required is above 25%, an exclusiveSBEP will be issued for the whole exposure.In this product no credit limit needs to befixed on any buyer and no declarations arerequired to be submitted. This policy isoffered only to large customers who have astrong internal system of appraising itsbuyers. Premium has to be paid on the ALLfor which the rate is fixed before theapplication of discounts. Some of the keycustomers hold a combination of declaration-based and exposure-based policies, usuallywhen the number of shipments isextraordinarily large.
Special focusSome of the key customers who qualified interms of minimum premium and claims-to-premium ratio were issued Customer SpecificPolicies, since their requirements were notfully met by the existing basket of products.Great care is taken in designing such coversand decisions are taken by a high-poweredcommittee at the corporate level. Bigcorporate policyholders demand moreattention for continuous service andconsultation. They also expect finer termsand cost for the covers availed by them. It is acontinuous challenge to keep them happyand satisfied. Hence various aspects of theserelevant covers at the time of issue or renewalare dealt with at corporate level by a high-powered underwriting committee.
Support to banks to enable adequateexport creditECGC has been supporting exporters notonly by covering their export receivables, butalso by offering protection to banks who lendto exporters. This enhances the flow of bankcredit to the export sector, which is verycrucial for the growth and even sustenance ofany sector. Around 60% to 65% of the totalexport credit in the Indian banking sector iscovered by ECGC. Out of the majorcustomers, 70% have been availing financefrom banks which are supported by ECGC.
Customer is kingCustomer relationship is one of the focusareas of ECGC. Customer consultation playsan important role in designing new productsand in modifying existing ones, to suit theneeds of Indian exporters in the everchanging global scenario. ECGC strives toattain growing business volumes andmaintain high servicing standards. With thisstrategy it believes that serving keypolicyholders that are significantlycontributing to the country’s exports is animportant element to sustain highercustomer satisfaction levels while ensuringcompliance with existing regulatory norms.ECGC is committed and geared to achievethe goals and mandate for which it has beenestablished. ■
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Customer consultation plays an important role indesigning new products and in modifying existing ones,to suit the needs of Indian exporters in the everchanging global scenario.
In order to find an answer to this veryinteresting and valid question, one needs toexamine statistics: world trade volumes haveseen a startling increase in open accounttransactions over recent years. At the end of2014, approximately $14 trillion or about 80%of the total world trade volume (exports) of$18.5 triillion1 is handled on open accountpayment terms. Some $4.5 trillion of exporttransactions are covered against paymentrisks through letters of credit (LC). Short-term export limits reached an amount of$1.051 trillion by the end of 20142.
If we assume for a moment that the short-term credit insurance limits do not refer to LCtransactions (rather unlikely), one couldconclude that a maximum of $5.5 trillion outof $18.5 trillion is protected against paymentrisks. Or in other words, some $13.5 trillion isnot protected against payment risks. Expertsforesee further growth in world trade –predominantly on open account paymentterms - hence the non-insured volume ofworld trade will grow.
Digitisation kicks inBut not only is the ongoing growth of worldtrade remarkable. Another development hasto be considered, too: the exponential growthof digitisation in world trade. Clientsundertake huge efforts to expand and
diversify their valuegenerating processes.The increasedcomplexity thatrelates to that iscounter-balancedthrough automationand digitisation. As aconsequence, clientsexpect automatedsolutions for both thesettlement as well asthe mitigation ofoperational andpayment risks fortheir tradetransactions.
The Bank PaymentObligation (BPO)supports fullyautomated processing;allows cost savings
and combines all of this with paymentassurance and financing options. Today, thereis already a certain degree of competitionbetween banks and export insurers. But atthe same time, there are also very successfulmodels for collaboration between banks andECAs/re-insurers, which have been inexistence for some considerable time.
Considering the predicted further growth
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Friend or foe – will BPOcompete with short-term credit insurance?By Markus Wohlgeschaffen, global head of trade products, UniCredit andmember of the banking advisory board, International Chamber of Commerce(ICC); and Andre Casterman, global head of corporate and trade markets,SWIFT and chair of the BPO project
Markus Wohlgeschaffen
Andre Casterman
An alternative means of settlement in internationaltrade, the BPO provides the benefits of a letter of creditin a digital yet legally binding multi-bank environment.
of world trade on the one hand, and the hugevolume of non-insured payment risks, thereshould be plenty of growth opportunities forbanks and insurers. It appears particularlyappealing, because the BPO is fully digitisedand, hence, eliminates system frictions.
In parallel it generates big data volumes.The latter allows real-time monitoring andoffers new ways of risk management throughintelligent algorithms. Last but not least, sincebanks are actively involved via the BPO intrade transactions, they can much bettersafeguard Know-your-Customer (KYC) andKnow-your-Transaction (KYT) processes aswell as financial crime prevention byleveraging their prevailing client relationships.
In order to offer BPO-based services,financial institutions (FIs) need to implementthe inter-bank Uniform Rules for BPO (URBPO) as well as the underlying messagingstandards. This is facilitated by SWIFT’s ISO20022-compliant FI-to-FI messaging andtransaction matching cloud application calledthe Trade Services Utility (TSU). For FIs, theBPO is very convenient to use as it integratesinto the correspondent banking agreementsthat FIs have put in place for internationalpayment and trade transactions.
Increased benefits of BPO useAn alternative means of settlement ininternational trade, the BPO provides thebenefits of a letter of credit in a digital yetlegally binding multi-bank environment.Importantly for banks, it offers the possibilityof intermediation earlier in the supply chainby offering risk mitigation and financingservices as from the start of supply chains, i.e.where the sale contract is agreed through apurchase order.
A BPO is an irrevocable undertaking givenby one FI to another that payment will bemade on a specified date after a specifiedevent (such as delivery of goods) has takenplace. The specified event is evidenced by amatch report generated by a commonmatching application trusted by all trade
banks, i.e. SWIFT’s TSU. BPOs can beincorporated into the TSU through a buyer’sbank or a third party bank. The BPO is duewhen data is accurately matched or when allfinancial institutions involved in thetransaction have accepted any mismatches ordiscrepancies.
This process results in a fully electronicalternative to the letter of credit, whichdelivers immediate efficiency gains, workingcapital reduction and cost savings. Thedevelopment of the BPO has proved that thefinancial services industry can join forces tosolve a problem and that, as a result, morefinancial services such as risk mitigation andtrade finance services can be digitised, i.e.beyond payment and cash managementservices.
The industry has attempted todematerialise trade flows several times sincethe 1990s, and many initiatives have notdelivered as expected. The first BPOimplementations completed over the last twoyears suggest that this innovation will helpthe trade industry address the digital tradechallenge. It seems that getting ready on theBPO sooner than later is a wise choice fortrade bankers. ■
Sources1 WTO2 Berne Union
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The development of the BPO has proved that thefinancial services industry can join forces to solve aproblem and that, as a result, more financial servicessuch as risk mitigation and trade finance services can be digitised.
For FIs, the BPO is veryconvenient to use as itintegrates into thecorrespondent bankingagreements that FIs have put in place forinternational payment and trade transactions.
With approximately half a billion dollars intrade finance assets under management,Federated Investors is one of the few financialinvestors which has actively embraced thebenefits of the asset class. Bob Kowit (BK), amember of the trade finance team atFederated Investors, is passionate about thelow-risk returns trade can generate forfinancial investors – but equally fired upabout banks’ failure to package, standardiseand explain trade in a way that investorsunderstand.
TXF: What can trade finance assets offerfinancial investors that they can’t getelsewhere?Bob Kowit (BK): Trade finance did wellthrough the crisis and it’s been a very strongalpha source for a number of our funds,outperforming in recent months virtuallyeverything else with just a fraction of thevolatility based on the daily pricing we get.
At any point of the maturity spectrum,whether it’s receivables at the short end ofthe market or pre-export trade finance at thelonger end, the risk-adjusted returns of tradefinance and its lack of correlation are superiorto anything you can find in financial markets.And it delivers a powerful diversificationbenefit with low to negative correlation to avariety of income-related asset classes.
A lot of investors globally are concernedabout the eventual rise of interest rates,which could create the perfect storm in termsof demand for floating rate assets like tradefinance.
Floating-rate notes right now will deliversomething between 40 and 60 basis points
over Libor. The markethowever is very smallso if you have size toinvest, it’s verydifficult to getsignificantdiversification withoutinvesting in tradefinance.
And as you moveout of that spectrum
and look at things like pre-export tradefinance and compare it with the leveragedloan market, over the past nine or ten yearstrade finance has delivered very similarreturns but with a fraction of the volatility.
TXF: Tell me about Federated’s journey into the world of trade finance. Whatopportunities do you offer to outsideinvestors?BK: When I joined Federated Investors in1995, I thought that trade finance would bean excellent alpha source for internationalbond portfolios, the structure of the marketbeing short-term floating rate assets that hada completely different risk profile thananything else. So we were very interested butimmediately ran headlong into problems.
For example, none of the major custodianscould settle or safe-keep a trade financetransaction. Each deal is very documentationintensive and if you’re going to do any kind ofresearch, you have to have access to thosedocuments and you have to have thecooperation of the mandated lead arrangers(MLAs), whether they are banks or ECAs orofficial organisations. There is no central spot
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Looking at the benefitsof trade finance as anasset classHelen Castell at TXF talks to Bob Kowit, a member of the trade finance teamat Federated Investors, about the challenges involved in creating a pool oftrade finance assets that appeal to financial investors, how export creditagencies (ECAs) could help overcome some of these obstacles, and whytrade assets are starting to enter the radar of cash-rich corporates.
Bob Kowit
where you can go to view a calendar ofupcoming deals.
We were eventually able to get throughthat when our main custody partner acquireda small specialty bank that could settle andsafe-keep trade transactions. We startedbuying individual transactions into our fundsin 2006.
On the investment management sidehowever, for any asset that you buy into afund – even for assets like trade finance thatare considered illiquid – you have to be ableto have a price for that. And none of the priceproviders at the time – even the guysspecialising in loans – could provide even anapproximate price. We finally found a pricingsource and we were able to start buyingtransactions into our own funds.
They went well. And especially in 2008and 2009, during the financial crisis, tradefinance behaved completely differently thanany other assets. That got the rest of ourportfolio managers at Federated interested –some of the domestic managers wanted tomake an allocation to a diversified pool oftrade finance assets.
So we went to the Securities andExchange Commission (SEC) and we got anexemptive order, which allowed us to create a40 Act fund called the Project and TradeFinance Core Fund – a special pool designedto be used only by our own portfoliomanagers.
Internally we then had a very long series ofdiscussions over a few years as to whether tokeep trade finance as an alpha source for ourown funds or to go outside to majorinstitutions who might want to use tradefinance as a standalone asset. We started thateffort about three and a half years ago.
TXF: What was the initial response like? Anychallenges?BK: What we found was that even the largest,most sophisticated investment institutions inthe US and globally had no idea what tradefinance was. When we go in to speak to someof these big pools of assets – and we’respeaking generally to the senior people there– they like the idea, they like the concept.
But it’s then handed over to a team ofanalysts to research, because they have to dotheir due diligence. The first thing they do isgo over to their Bloomberg terminal and findthere’s nothing there about trade finance. Infinancial investing, if it’s not on Bloomberg, itdoesn’t exist – it’s invisible.
Also, anything that’s been published – all
of the research on trade finance, all of thereports, by the World Trade Organisation(WTO) or the International Monetary Fund(IMF) – all those are written for practitioners,for commercial banks, for Berne Unionmembers. There’s nothing there thataddresses the problems faced by a financialinvestor. Some of those problems seem againinvisible to banks.
For example, when we want to invest in atrade finance transaction, we first have to beapproved by a bank’s compliancedepartment, which will do anti-moneylaundering and know-your-customer (KYC)checks. Those banks understand how to dodue diligence on another bank but havelimited experience in how to analyse apension fund, an insurance company, anendowment or a sovereign wealth fund.
So if, say, one were to buy $100 million of atransaction and allocate it over a variety ofaccounts, it becomes very cumbersome,because you have to go through all thosebureaucratic steps for each account. Then inorder to maintain some aggressivediversification – over country, sector or MLA –
you have to be open with a lot of differentbanks in order to get the flow of assets thatyou need to populate a diversified portfolio.
This is why the time and effort we haveinvested to create a pooled vehicle solutioncan be so beneficial to institutional investors.We are currently open with over 50 banks,ECAs, and supranationals that show usbetween 600 and 800 transactions a year.
At the same time, in financial markets,there’s a very active dealer community andyou can use a Bloomberg function called theNew Issue Monitor (NIM) to see everythingthat’s scheduled to come to market and whatthe price talk is. So you can line up a month inadvance what you think is coming to marketand what the impact is going to be.
In contrast, trade finance is a veryfragmented market, despite the enormousvolumes. There is no place you can go to geta comprehensive view of what’s in the marketand what’s going on – it’s very difficult toaccess.
In order for a bank to be able to structure129
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We are currently open with over 50banks, ECAs, and supranationals thatshow us between 600 and 800transactions a year.
and distribute trade, it also needs to be ableto pay all the different profit centres at thebank that are involved, such as securitiessales and syndication. But so far, there’s beenno willingness to absorb any of that expense.
TXF: What could trade finance banks do tohelp overcome this?BK: In order for trade finance to becomemore usable by financial investors, the firstthing that the big trade finance banks have todo is agree on a standardised set ofdefinitions.
The few definitions out there are writtenby bankers to address what they thinkinvestors want to know. But the dividebetween the commercial bankers that controltrade finance and financial investors isincredible. There is virtually no understandingof what financial investors need.
There’s a constituency at some of thelarger commercial banks who insist thatthere’s a magic bullet, that trade finance canbe securitised. And so far there have beenseveral attempts at that, none of which havebeen particularly successful.
But to get real institutional investorsinvolved, you have to at the very least providea good base of education about what tradefinance is.
TXF: What role could ECAs play?BK: ECAs are in such a great position to bethe sponsors of change. You have a finitenumber of ECAs globally. They can set thestandard by just saying ‘These are ourdefinitions – this is how trade finance works’and simply taking it away from thecommercial banks.
In the perfect vacuum that you have rightnow, whoever says ‘These are the rules’, thoseare the rules. It would be a pretty easy,inexpensive, effective thing for ECAs to do.
You might have some complaints from thecommercial banks – ‘We should be involved inthis.’ Well, why weren’t you?
Berne Union members could also have arole in terms of helping put togetherstructures that lay off risk or insure deals insome way, shape or form.
It’s just a question of stepping in front ofthe banks. Commercial banks have had amonopoly on this – in terms of adjustedreturns, it’s probably been their mostprofitable business. ECAs could certainly be alittle bit more aggressive in setting thestandards for the business.
We welcome the opportunity to share our
experiences with development banks, ECAs,and members of the official community.
TXF: What has Federated done to help closethe education gap about trade finance assets?BK: When we first started going out speakingto institutions about trade finance, we spent ahuge amount of time explaining how it works– what the mitigants were, what the riskidentification protocols were, what ourdiversification tools were. And you could seeeyes glaze over. So when we present now, wedo it in reverse order – we explain ‘this iswhat trade finance does’.
Global trade is expected to grow at a pacethat banks and ECA balance sheets willstruggle to keep up with. The last WTOresearch I saw sees global trade growingfrom about $18 trillion last year to over $100trillion by 2050, with the majority of thatgrowth coming from South-to-South trade.Those are the countries that need tradefinance the most yet are at the most risk ofbeing shut out. To effectively provide tradefinance in those areas, you need ECAs andyou need banks with a local presence.
So we’ve expanded our efforts to developmore relations with the ECAs and thedevelopmental banks around the world thatuntil recently had never even heard of us.
The other thing that has to happen is thattrade finance has to become recognised bymore of the consultants who advise themajor pools of assets.
No matter how much a fund’s chiefinvestment officer (CIO) might like tradefinance, almost every major pool of assets isworking with one of the big consulting firms,and they require an enormous amount of duediligence.
We were told when we started the processthat at best it’s a 12 to 18-month process. Andthen when you’re talking about the really bigpools of assets – the huge pension funds inthe US and sovereign wealth funds – that canalso be a 12- to 18-month process. That iscertainly what we have experienced.
TXF: Is there any change in the kinds ofinvestors that are looking at trade finance?BK: There seems to be a lot more interest intrade finance assets among large corporates.
One thing that’s surprised us is the size ofthe cash pools some of them are sitting on.Federated is known for its cash managementcapabilities so we thought we kneweverything about all the major cashmanagement operations around the world
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because most of them do business with us. But we found that at a number of these
corporates, their cash piles have become solarge that they really don’t need short-termaccess to the cash on a daily basis.
Some of them have put together teams ofguys specialising in absolute return oralternatives, and they now almost resemble afund of funds rather than a corporate cashmanagement operation. Because with cashrates so low, you just need a relatively smallpercent allocated to something like tradefinance to double or triple your cash returns.
So that was a surprise to us. We thoughtthat corporate cash management was justsuper conservative – everything had to havedaily liquidity, zero risk. But there are sometruly huge corporate names looking at this.
TXF: How much interest have you seen frombanks wanting to tap investor interest?BK: We have been approached by two of themajor trade finance banks, wanting to sort ofrent our name. Their proposal was that ‘wethe banks will choose the assets and you willbe named as the manager.’
However, we would never do anything likethat. If we’re going to manage something, wehave to have final say on what goes into it.
So they said ‘Ok, well just give us thestandards that you want for diversificationand we will choose the assets to meet them.’
Again, because of the adverse selectionrisk in something like that, this is somethingwe wouldn’t do and something that none ofthe major institutions we’ve spoken to wouldaccept.
With the compliance and regulatory worldgoing in the direction that it is, anything thathas that level of selection bias in it is going tohave a very difficult time plus a huge amountof residual risk for whoever the financialadvisor is. And that is why the rules forcollateralised loan obligations (CLOs) havealready changed in Europe and are about tochange in the US, where the manager has toretain at least a small part of the risk on hisown balance sheet.
TXF: What’s the future for trade finance asan asset class for financial investors?BK: Whether it’s for commercial banks orECAs or developmental banks, the first stephas to be education. The objective has to begetting trade finance recognised as a viableand very attractive asset.
Our vested self-interest is that it’s not untilother people get involved in the market –
other major financial managers – that theasset class is going to grow. Now we have areasonable slice of a very, very small pie, andwe’d rather have a smaller slice of a much,much larger pie.
I think trade finance is probably at thebeginning stages of the evolution that we’veseen in a number of other markets. If you goback to the mortgage markets beforedocumentation was standardised, there wasno such thing as a new-issue high-yield bonduntil the late 1980s. Emerging market debtalso took around 10 years to go through itsevolutionary process.
Right now I think we’re at the beginning ofthat stage with trade finance, but so far therehasn’t been enough of a crisis to get thebanks to move.
I’m not sure what that crisis will be,because trade finance really is an aggregationof idiosyncratic risk – there are very fewthings that can hit the entire market at once.It’s going to take a pretty significant battering
ram to break down the wall between thedifferent profit centres in the major banks thatdominate trade finance. But it’s inevitable.
TXF: And for Federated?BK: So far we have not seen any of the othermajor asset managers offering a pure tradefinance product.
We view our portfolio as an aggregation ofidiosyncratic risks based on aggressivediversification and a clearly articulated creditbased investment process.
What we have – and we didn’t realise howpowerful this is – is an extremely large andcompetent back-office capability. We werealso able to get the right people in the rightspot to come up the learning curve reallyquickly so things like the heavy level ofdocumentation and the different accountingstandards were all pretty effectivelyaccommodated by our systems.
So we think that we probably have morescalability on that side and we’re still goingthrough that learning process, but we areconfident we will continue to grow. ■
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In order for trade finance to becomemore usable by financial investors, thefirst thing that the big trade financebanks have to do is agree on astandardised set of definitions.
Berne Union 2015
Berne Union 2015
4Directory
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ContentsMembers of the Berne UnionABGF Brazil 135AIG USA 135ASEI Indonesia 136ASHRA Israel 136ATI ✦ Multilateral 137ATRADIUS Netherlands 137BANCOMEXT Mexico 138CESCE Spain 138COFACE France 139COSEC Portugal 139CREDENDO GROUP Belgium 140ECGC India 140ECIC SA ✦ South Africa 141ECICS Singapore 141EDC Canada 142EFIC Australia 142EGAP ✦ Czech Republic 143EH GERMANY (State) Germany 143EH GERMANY (Private) Germany 144EKF Denmark 144EKN Sweden 145EXIM HUNGARY ✦ Hungary 145EXIM J Jamaica 146EXIMBANKA SR ✦ Slovak Republic 146FCIA USA 147FINNVERA Finland 147GIEK Norway 148HISCOX Bermuda 148HKEC Hong Kong 149ICIEC ✦ Multilateral 149KSURE Korea 150KUKE ✦ Poland 150MEXIM Malaysia 151MIGA Multilateral 151NEXI Japan 152ODL Luxembourg 152OeKB Austria 153OPIC USA 153PwC Germany 154SACE Italy 154SERV Switzerland 155SID ✦ Slovenia 155SINOSURE China 156SLECIC Sri Lanka 156SOVEREIGN RISK Bermuda 157TEBC Chinese Taipei 157THAI EXIMBANK ✦ Thailand 158TURK EXIM Turkey 158UK EXPORT FINANCE UK 159US EXIMBANK USA 159XL CATLIN UK 160ZURICH USA 160
✦ Also members of The Prague Club
Members of the Prague ClubAOFI Serbia 161BAEZ Bulgaria 161BECI Botswana 162DHAMAN Multilateral 162ECGA O Oman 163ECGE E Egypt 163ECIE United Arab Emirates 164ECIO Greece 164EGFI Iran 165EIAA Armenia 165EXIAR Russia 166EXIM R Romania 166EXIMGARANT Belarus 167HBOR Croatia 167IGA Bosnia and Herzegovina 168JLGC Jordan 168KAZEXPORTGARANT Kazakhstan 169KREDEX Estonia 169LCI Lebanon 170LGA Latvia 170LPEI Indonesia 171MBDP Macedonia 171NAIFE Sudan 172NZECO New Zealand 172SEP Saudi Arabia 173SONAC Senegal 173TASDEER Qatar 174UKREXIMBANK Ukraine 174UZBEKINVEST Uzbekistan 175
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AIG has underwritten political risk insurance since 1978 and tradecredit insurance since 1982. AIG issuing companies are rated A+.
General informationGlobal Trade & Political Risk Insurance175 Water StNew YorkNY 10038+1 212 770 7000+1 212 458 [email protected]
HistoryFounded: 1978Ownership: American International Group
Senior managementHarry [email protected]
John HegemanSenior Vice-President [email protected]
Neil RossTrade Credit Regional Manager, [email protected]
William ClarkHead of UK Trade [email protected]
Contact person(s)Carolyne [email protected]
Edward Brittenham [email protected]
Maria [email protected]
Major facilities✓ Trade credit insurance: Coverage against non-payment of
short-term trade receivables, both export and domestic.Tailored policies are available to meet the needs of largecorporations, middle-market firms, and banks.
✓ Investment insurance: Confiscation, expropriation,nationalisation, currency inconvertibility and political violencefor both equity investors and financial institutions.
✓ Political risk insurance: Contract frustration, wrongful calling ofguarantees and a wide range of customised covers forimporters and exporters.
AIGGlobal Trade & Political Risk Insurance
USA
Berne Union 2015
ABGF offers a modern instrument aimed at supporting Brazilianexporters in the international market. In MLT transactions, thepolicies are characterised by maturities that exceed two years and,in general, are related to projects involving capital goods, servicesand other specific contracts. Brazilian Federal resources coverthese transactions through the FGE – Fundo de Garantia àExportação (Export Guarantee Fund). ABGF acts on behalf of theState, providing all the technical analysis and management ofexport credit insurance policies.
General informationBrazillian Export Credit Insurance AgencyAv. Rio Branco, nº1, 9º BRio de JaneiroCEP: 20090-003+55 21 2510 5000+55 21 2510 [email protected]
HistoryFounded: 2013Ownership: Brazilian Federal Government
Senior managementJeanine SáHead of Legal [email protected]
Marcelo [email protected]
Rodrigo AlbanesiHead of Risk Mgmt and [email protected]
Vitor [email protected]
Contact person(s)Pedro CarricoInternational [email protected]
Major facilities✓ Export credit insurance:
– MLT cover: commercial and political risks– Percentage of cover for commercial risks: up to 95%. In the
case of commercial risk transactions that hold a bankguarantee issued by acceptable financial institution, thepercentage of cover may rise to up to 100%. Percentage ofcover for political risks: up to 100%.
– Supplier and buyer credit cover– Structured and project finance
ABGF Brazilian Export Credit Insurance Agency
BRAZIL
Members of the Berne Union
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Is a general insurance company, established on 9 October 2014 as a result of a corporate spin-off from PT. Reasuransi Indonesia Utama (Indonesia-Re) or formerly known as PT. Asuransi Ekspor Indonesia (Persero). Where Indonesia-Re’s main purpose is to decrease Indonesia’s trade deficit particularly contributed by the insurance sector, PT. Asuransi Asei Indonesia (or Asuransi Asei) continues to undertake its function as the ECA of Indonesia and to support indonesia exports and the development and growth of the nation’s economy in general. To support the demands of the Indonesian market, Asuransi Asei provides various types of insurance products which include export and domestic credit insurance, domestic credit guarantees, counter bank credit guarantees, import insurance and general insurance to Indonesian exporters/importers, domestic sellers/buyers and banks. Asuransi Asei is also deeply involved in the bonding sector as it is licensed to issue advance payment bonds, bid bonds, performance bonds, (retention) maintenance bonds and customs bonds. The service of network of Asuransi Asei comprises 21 branches and 31 marketing offices established in all of the major industrial cities across Indonesia.
General informationPT. Asuransi Asei Indonesia (Asuransi Asei)
HistoryFounded: originally founded in 1985, and spun-off its insurance and reinsurance business in 2014Ownership: 99,998% owned by Indonesia-Re, 0.002% owned by ASEI’s employee cooperative
Senior managementEko Wari Santoso, [email protected] Syamsudin Cholid, Finance [email protected] Riduan Simanjuntak, Technical [email protected] Zaman, Development [email protected]
Contact person(s)Miguel Kosasih, Inward Reinsurance Financial Risk Department Head [email protected] Kerma, Corporate Secretary Division [email protected] Budi Setiawan, Business Development and Corporate Planning Unit [email protected]
Major facilities✓ short and medium term Export & Domestic Credit Insurance(post-shipment &pre-shipment financing)✓ Counter Bank Credit Guarantees✓ Surety Bonds✓ General Insurance✓ Inward Reinsurance (Financial Risk)
ASEIPT. Asuransi Asei Indonesia
INDONESIA
ASHRA (formerly IFTRIC) is a governmental corporation,established in October 1957 to promote Israeli exports and toprotect the exporters against political and commercial risks relatedto international activities. ASHRA covers MLT credit risks andprovides investment insurance. As the official export credit insurer,ASHRA covers non-marketable risks. The company’s policies arebacked by the full faith and credit of the Israeli government.
General informationThe Israel Foreign Trade Risks Insurance Corporation65 Menachem Begin Rd, POB 20208Tel-Aviv61201+972 3 5631700+972 3 [email protected]
HistoryFounded: 1957Ownership: 100% state-owned
Senior managementTzahi Malach, [email protected]
Contact person(s)Adi Gross, Chief Underwriting [email protected]
Maria Kofman, Head of Underwriting and Insurance [email protected]
David Klein, VP Marketing & Business [email protected]
Major facilities✓ Export credit insurance: Medium and long-term (over one
year) export credit insurance against political and commercialrisks. Major insurance facilities: supplier’s and buyer’s creditcoverage; credit lines; forfaiting and letters of credit insurance;bonds insurance.
✓ Investment insurance cover offered: conversion/transfer risks;war and civil war risks; expropriation/confiscation risks; breachof contract by the host government.
ASHRAThe Israel Foreign Trade Risks InsuranceCorporation Ltd
ISRAEL
Head office: Menara Kadin Indonesia Building 21st and 22nd floorJln H. R. Rasuna Said Blok X-5 Kav. 2-3Jakarta, 12950Indonesia+62 21 5790 [email protected]@asei.co.id
David Klein, VP Marketing & Business [email protected]
Adi Gross, Chief Underwriting [email protected]
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ATI was founded in 2001 by African States to cover the trade andinvestment risks of companies doing business in Africa. ATIprovides Political Risk, Surety Bonds, Trade Credit Insurance andPolitical Violence and Terrorism & Sabotage cover. As of 2014, ATIhas supported over $17 billion in trade and investments acrossAfrica in sectors such as agribusiness, energy, exports, housing,infrastructure, manufacturing, mining and telecommunications. ATIis the #1 ranked insurer in Africa with the 2014 renewal of its LongTerm ‘A/Stable’ rating for Financial Strength and CounterpartyCredit by Standard & Poor’s.
General informationThe African Trade Insurance AgencyKenya Re Towers, 5th Floor, Upperhill off Ragati Road P.O. Box 10620Nairobi GPO 00100+254 20 272 6999+254 20 271 [email protected]
HistoryFounded: 2001Ownership: ATI is currently owned by the following African membercountries and public/private sector organisations: Benin, Burundi,Democratic Republic of Congo, Kenya, Madagascar, Malawi,Rwanda, Tanzania, Uganda, Zambia, African Development Bank,African Reinsurance Corporation, Atradius Group, Kenya Re, SACE,The Common Market of Eastern and Southern Africa (COMESA),The Eastern and Southern African Trade and Development Bank(PTA Bank), The PTA Re Insurance Company (ZepRe)
Senior managementCyprien Sakubu, Chief Investor Relations [email protected]
George O. Otieno, Chief Executive [email protected]+254 20 272 6999
Jef Vincent, Chief Underwriting [email protected]
Toavina Ramamonjiarisoa, Chief Financial [email protected]
Contact person(s)George O. Otieno, [email protected]
Sheila Ongas, Communication [email protected]+254 719 014 214
Sherry Kennedy, Senior Communications [email protected]+254 719 014 209
Major facilitiesWe offer two main insurance products that cover political andtrade credit risks. Foreign direct investment risks fall under ourpolitical risk insurance. We also offer reinsurance coverage toinsurance companies operating in or supporting business into orout of our African member states. Here is a selection of thepolitical trade credit risks that are covered by our insurancepolicies: Expropriation, arbitral award default, transfer restriction,mobile assets, war, civil disturbance or civil commotion, unfaircalling of bonds, embargo, comprehensive non-payment,terrorism, sabotage, political violence.
✦ Member of The Prague Club
ATI ✦The African Trade Insurance Agency
MULTILATERAL
ATRADIUS provides trade credit insurance, surety and collectionsservices through 160 offices worldwide, and has a presence in 45countries. Its products help protect companies from payment risksassociated with selling products and services on credit.
General informationAtradiusDavid Ricardostraat 1Amsterdam1066 JS+31 20 553 [email protected]
HistoryFounded: 1925Ownership: Grupo CyC 64.23%; Grupo Catalana Occidente 35.77%
Senior managementIsidoro [email protected]
Contact person(s)Christine GerrynDirector Group Communication and Commercial [email protected]+31 20 553 2260
Major facilities✓ (Export) credit insurance: These services are designed to
protect companies against the risk of non-payment bydomestic and foreign customers. We also act as ECA for theDutch government (ATRADIUS Dutch State Business).
✓ Global policy: This can be adapted for the specific structureand requirements of multinationals – umbrella cover withcommon terms for the group but with individual, localisedpolicies for country subsidiaries.
✓ Bonding: Offered in France, Italy, Spain and the Nordiccountries. Bonding products can protect companies againstthe failure of a supplier to meet agreed performancestandards.
✓ Debt collections: ATRADIUS has a global network of debtcollection professionals, with offices throughout Europe andNorth America.
✓ Reinsurance: The credit insurance and bonding business ofprimary insurers in many markets across the world issupported by the underwriting and reinsurance of premiumsthrough Atradius Reinsurance.
ATRADIUSAtradius N.V.
NETHERLANDS
CESCE was founded in 1970 to primarily operate in the field ofexport credit insurance for the account of the State, as aninstrument to foster Spanish exports. After deregulation in 1990,CESCE started to actively compete for its own account on the openexport credit and domestic credit insurance markets. The companyis currently present in Spain, Portugal, France and Latin America(Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela).CESCE specializes in the comprehensive management ofcommercial risk and integrates INFORMA D&B, (the financial andcommercial information provider) and CTI, (the provider of ITservices).
General informationCESCE Credit InsuranceC/ Velázquez, 74Madrid28001+34 91 423 48 05+34 91 576 51 [email protected]
HistoryFounded: 1970Ownership: CESCE is a limited company. 50.25% of its shares areheld by the Spanish State, while the remainder is in the hands ofSpain’s main banking and insurance groups, among which areBSCH, BBVA, Banco Sabadell and Banco Popular.
Senior managementAlvaro [email protected]
Beatriz RegueroCOO Chief Operating Officer, State Account [email protected]
Luis-Antonio IbanezCOO Chief Operating Officer, Private [email protected]
Contact person(s)Carmen MuñozCountry Risk and Debt Management [email protected]
Major facilities✓ Export Credit Insurance: Commercial and political cover for
export markets and commercial cover for domestic markets;pre and post-shipment risks for both short-term andmedium/longterm transactions.
✓ Investment Insurance: Conversion/transfer, war and civil war,breach of undertakings by host government, expropriation/confiscation. Bonds and guarantees: unfair calling, fair callingof bonds, cover to banks, bonds/guarantees issued.
CESCECESCE Credit Insurance
SPAIN
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Bancomext is organized in seven divisions (Business Financing,SME Development, Financing, Credit 6 Risk, Legal & Fiduciary,Administration and Finances and, lastly, Institutional andInternational Relations) supported by a top quality management.Bancomext has a very strong and solid corporate governance. Weare managed by a Board of Advisers, a Committee for thePromotion and Support of International and Foreign Trade, ourChief Executive Officer, and our Board of Directors, which consistsof 15 members, most of them senior goverment officials.
General informationBanco Nacional de Comercio Exterior, SNCPeriférico Sur 4333 Jardines de la Montaña, TlalpanMexico City+52 55 5449 9000www.bancomext.com
HistoryIn 1937, Banco Nacional de Comercio Exterior, was founded topromote, develop and organise Mexico’s foreign trade. In 2013, themission of Bancomext to promote economic and social growth byfinancing Mexico´s international trade is included in the NationalDevelopment Plan. In 2015 Bancomext is the fastest growing bankin the Mexican banking industry, and has the seventh largestcorporate loan portfolio in the Mexican financial system (a year toyear growth of 41.3%).
Senior managementFernando HoyoDeputy General Director, SME [email protected] +52 (55) 5449.9392
Jorge Di SciulloDeputy General Director, Legal and [email protected] +52 (55) 5449.9111
Leonrado Arana de la GarzaDeputy General Director, Business [email protected] +52 (55) 5449.9142
Miguel Angel Ochoa, Deputy General Director, [email protected] +52 (55) 5449.9062
Miguel SiliceoDeputy General Director, [email protected] +52 (55) 5449.9074
Ricardo OchoaDeputy General Director, Institutional and International [email protected] +52 (55) 5449.9390
Contact person(s)Dorotea Ortiz MarkivichVice-President, International Organizations and [email protected] +52 (55) 5449.9042
Eugenio MacGregorManager International Financial [email protected] +52 (55) 5449.9143
Patricia LizarragaVice-President International Financial [email protected] +52 (55) 5449.9145
BANCOMEXT Banco Nacional de Comercio Exterior, SNC
MEXICO
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Founded in 1946, Coface, a global player in credit insurance, is a private company. . .It is a recognized expert in the analysis and management of macro- and micro-economic risks, it provides comprehensive, flexible and scalable solutions worldwide to protect every company, regardless of its size, nationality or sector of activity, against the risk of insolvency of its debtors – on their domestic and foreign market.Coface relies on its powerful international network to offer credit insurance in 99 countries.
Since 1946, Coface has been managing State guarantees on behalf of, and with the guarantee of, the French state, with the aim of promoting, supporting and securing French exports, in particular those financed in medium and long terms and investments.abroad Coface offers a wide range of insurance products to cover risks that cannot be covered in the private sector,.The various coverage allows businesses to be assisted throughout their export process..
General information COFACE SA1, place Costes et Bellonte 92270 Bois – Colombes France+33 1 49 02 20 00www.coface.com [email protected] [email protected]
History Founded: 1946, listed company (Euronext, Paris - SBF 120.)Ownership (at 31 Decembrer 2014): Floating capital : 58,51%-Natixis:41,24%- Employees: 0,25%
Senior management Jean-Marc Pillu (CEO)
Contact person(s) Anna Robert [email protected]
Major facilitiesPrivate Credit insurance to support customers at every stage of their development to anticipate, assess, and secure risks, and to make the best decisions in managing export and domestic receivables.
COFACECoface
FRANCE
COSEC – Companhia de Seguro de Créditos – began operating in1969, as a limited company with the State as its major shareholder.Since November 1992, COSEC has been a private company and itsshares held one of the largest banks in the Portuguese financialsector and the world leader in the credit insurance market.
COSEC is the leading insurer in Portugal for credit and bondinsurance, offering credit control solutions both for internal andexternal markets, and is also responsible, for account and by orderof the Portuguese State, for covering and managing credit andinvestment in political risk countries.
General informationCompanhia de Seguro de Créditos, SAAv. da República, 58Lisbon1069-057+351217913700+351217913720www.cosec.ptcosec@cosec.pt
History1969 – COSEC is created on 29 December, mainly with publiccapital. 1975 – COSEC is nationalized. 1992 – COSEC's Privatization(100%). 1996 – BPI Bank becomes major shareholder. 2007 – EulerHermes becomes shareholder of COSEC, together with BPI Bank,each one owning 50% of COSEC’s share capital. 2014 – COSECpresents a new brand image
Senior managementBerta Dias da CunhaExecutive Member of the Board of [email protected]
José Miguel Gomes da [email protected]
José VairinhosExecutive Member of the Board of [email protected]
Thierry EtheveChief Executive [email protected]
Contact person(s)André GranadoMarketing [email protected]
Maria José MeloDirector, International [email protected]+351 21 791 3826
Major facilities✓ Export credit insurance: Export credit insurance short-term
cover – commercial and political risks, pre-shipment and creditcover.
✓ Medium/long-term cover: Supplier and buyer credit facilities,lines of credit and project finance cover.
✓ Investment insurance: Covers offered – expropriation/confiscation cover, conversion/transfer cover, war and civil warcover, breach of contract by the host government cover.
✓ Bonds and guarantees: Covers offered – bid bond performancebond, retention bond, advance payment bond, customs andtax authorities bonds, bonds/guarantees issued.
COSECCompanhia De Seguro De Créditos, SA
PORTUGAL
Coface State guarantees✓ Export credit insurance : Business interruption and non-payment risks cover for medium/long term export transactions following commercial and/or political events;✓ Foreign investment insurance against political risks✓ Bonds and working capital guarantee (exporter’s risk)✓ Exchange risk insurance✓ Market survey insurance
Credendo Group (formerly known as ONDD Group) is the newidentity of a European trade insurance group present throughoutthe continent and active in all segments of trade credit insurance,providing a range of products that cover risks worldwide. The groupincludes Delcredere | Ducroire, Credimundi (the new name of theentity insuring short-term business), KUPEG, INGO-ONDD, Garantand Trade Credit. In 2014, the Credendo Group covered €95 billionin international trade and issued €371 million in premiums.
Delcredere | Ducroire is the official Belgian export credit agency.Backed by the state, its mission is to promote international traderelations, providing companies and banks trade credit insuranceagainst medium-term and long-term political and commercial risksworldwide. This business mainly relates to capital goods,contracted works, industrial projects and services. Delcredere |Ducroire’s solidity is underlined by its AA rating from Standard &Poor’s and cover capacity of €30 billion. As part of the CredendoGroup, Delcredere | Ducroire shares the group philosophy: to besmarter about risk and closer to clients.
Credimundi (formerly known as Ducroire | Delcredere SA.NV) hasa mission to provide companies within the European Union highlycustomised cover against political and commercial risks related toshort-term trade credit and current trade transactions, principallyin open account terms. It also issues legal and contractual bonds.Apart from its main office in Brussels, Credimundi is present withbranch offices in London, Paris, Wiesbaden and Milan. As part ofthe Credendo Group, Credimundi shares the group philosophy: tobe smarter about risk and closer to clients. For more information,visit www.credendogroup.com.
General informationCredendo Grouprue Montoyerstraat 3, Brussels 1000+32 2 788 88 [email protected]
HistoryFounded: 1921. Ownership: 100% state-owned.
Senior managementDirk Terweduwe, CEO, [email protected] Vanwingh, Deputy CEO, [email protected] Nabil, Deputy CEO, [email protected]
Contact person(s)Ivan Vertenten, Head Business Development and [email protected], 0032 2 788 8696
Major facilities✓ Insurance products:
– Supplier, buyer credits and project finance insurance– Unfair calling of bonds to be issued under the insured
contracts– Cover can be provided in all leading OECD currencies.
Occasionally, non-OECD currencies are eligible for cover– Investment insurance
✓ Other products:– Guarantees– Forfaiting
✓ Risks covered:– Pre-shipment risks– Non-payment risks
✓ Causes of loss covered:– Political (and similar) risks– Risks on private or public buyers/banks
✓ Amounts covered:– Principal and interest amounts, including interests on arrears
during waiting period. Delcredere | Ducroire has a flexibleattitude towards foreign content.
CREDENDO GROUPCredendo Group
BELGIUM
ECGC was incorporated in the year 1957 under the Companies Act,1956, to facilitate and strengthen India’s exports by insuring thecredit risk faced by Indian exporters / banks on lending to theexporters. The company is 100% owned by the Government ofIndia. The company is managed by a Board of Directors comprisingnominees of the Government of India, Reserve Bank of India,commercial banks, insurance companies and eminent persons fromthe exporting community.
The paid up capital of the company is currently Rs.12 billion(approximately $200 million) vs. the authorised capital of Rs.50billion (approximately $850 million).
General informationECGC LimitedExpress Towers10th Floor, Nariman PointMumbaiMaharashtra 400021+91 22 6659 0500/ 6659 0776+91 22 6659 0517/ 6659 [email protected]
HistoryFounded: 1957Ownership: Company with 100% shareholding of the Governmentof India
Senior managementGeetha Muralidhar, Chairman cum Managing [email protected], +91 22 66590514/15/16
M Senthilnathan, General [email protected], +91 22 66138401
Manoj Kumar, General [email protected], +91 22 66590721
R Padmavathy, General [email protected], +91 22 66590713
Rohit Pandya, General [email protected], +91 22 66590526
Sandeep Mukherjee, General [email protected], +91 22 66590725
Tapasi De, General [email protected], +91 22 66590523
Vasudevan Dharmarajan, General [email protected], +91 22 66590717
Contact person(s)Kumar Anshuman, Assistant General [email protected], +91 22 66138426
Manoj Kumar, General [email protected], +91 22 66590721
Ranvir Kishore, Assistant [email protected], +91 22 66138425
Major facilities✓ Export credit insurance to exporters✓ Export credit insurance to banks✓ Overseas investment insurance
ECGCExport Credit Guarantee Corporation of India
INDIA
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ECIC SA was established in 2001 in terms of the Export Credit andForeign Investments Insurance Act, 1957, as amended. It is aregistered insurer and a public company with limited liability. ECICprovides insurance that enables South African exporters to offertheir services and products on the international market, with aparticular focus on emerging markets in Africa that are consideredtoo risky by conventional insurers. Its overarching goal and itsmandate from the South African government as its soleshareholder is to make South African exporters attractive tointernational buyers to attract foreign income, stimulate localeconomic growth and create local jobs.
General informationExport Credit Insurance Corporation SOC LTDBlock C7, Eco Origins Office Park, 349 Witch Hazel Ave, Highveld Ext 79, Centurion, 0157Pretoria+27 12 471 3800+27 12 471 [email protected]
HistoryFounded: 2001Ownership: ECIC is fully owned by the South African Government
Senior managementKutoane Kutoane, Chief Executive [email protected]
Lesego Mosupye, Chief Risk [email protected]+2712 471 3800
Lindelani Mphaphuli, General [email protected]+2712 471 3800
Mandisi Nkuhlu, Chief Operations [email protected]+2712 471 3800
Sedzani Mudau, Chief Financial [email protected]+2712 471 3800
Contact person(s)Chris ThirionHead: Stakeholder Management & Strategy [email protected]+2712 471 3800
Ismail CarrHead: Marketing and [email protected]+2712 471 3800
Major facilities✓ Export credit insurance: Underwrites loans (buyer and supplier
credit as well as project finance facilities) over themedium/long-term, against commercial and political events ofdefault, breach of contract, currency inconvertibility andtransfer risk etc.
✓ Investment insurance: Cover offered to investors (equity,shareholder loans as well as commercial loans) againstexpropriation, confiscation, nationalisation, war, armedhostilities, civil war, rebellion, revolution or similar disturbances,currency inconvertibility and transfer risk.
✓ Performance bond insurance: Cover for performance bondsissued on behalf of exporters participating in exports of capitalgoods and/or services.
✦ Member of The Prague Club
ECIC SA ✦Export Credit Insurance Corporation of South Africa SOC Ltd
SOUTH AFRICA
ECICS Limited, a wholly-owned subsidiary of IFS Capital Limited(IFS), provides a wide range of risk management solutions throughits offer of domestic and export credit insurance policies, bondsand guarantees and general insurance business in Singapore. As apioneer in this area with over 30 years of risk managementexperience, ECICS is well-equipped to assist Singaporen companiesand branches of foreign companies.
General informationECICS Limited7 Temasek Boulevard, #10-01 Suntec Tower OneSingapore038987+65 6337 4779+65 6338 [email protected]
HistoryFounded: 1975Ownership: IFS Capital Limited – 100%
Senior managementRichard Ong, Head, [email protected]+65 – 63030183
Terence Teo, [email protected]+65 – 63030189
Vincent Lim, [email protected]+65 – 63030172
Contact person(s)Dorothy Lim, [email protected]
Hoefai Wong, Risk [email protected]+65 – 63030173
Sengliat Loke, [email protected]
Serene Hong, CEO [email protected]+65 – 63030169
Vincent Lim, [email protected]+65 – 63030172
Major facilities✓ Credit insurance✓ Comprehensive short-term policies (export/domestic)✓ Bonds & guarantees
– Performance bond– Foreign worker bond– Advance payment bond– Qualifying certificate bond– Bid and tender guarantee – deferred– Payment bond– Maintenance bond– Account payment bond– Customs bond– Tenancy/rental bond
General Insurance – Personal & Commercial Lines
ECICSECICS Limited
SINGAPORE
EDC is Canada’s export credit agency, established to support anddevelop, directly and indirectly, Canada’s export trade, as well asCanadian capacity to engage in that trade and to respond tointernational business opportunities. EDC is financially self-sustaining and operates on commercial principles. In addition tobeing a direct lender and insurer, EDC acts as a catalyst to leverageprivate capital and establishes partnerships both domestically andabroad.
General informationExport Development Canada150 Slater St., OttawaOntarioK1A 1K3+1 613 598 2500+1 613 237 [email protected]
HistoryFounded: 1944Ownership: EDC is fully owned by the Government of Canada
Senior managementBenoit Daignault President and Chief Executive Officer
Kevin Warn-Schindel Chairman of the Board
Contact person(s)[email protected]
Major facilities✓ Insurance: Credit insurance for export transactions, including
policies issued to financial institutions to cover foreign bankpayment obligations and purchased receivables. Contractinsurance for capital goods, service contracts and projects:Political risk insurance for equity investments, assets and debt,as well as comprehensive insurance policies issued to financialinstitutions for payment default on sovereign or quasi-sovereign debt obligations.
✓ Financing: Flexible financing solutions including buyer credits,supplier credits, bank guarantees, equity products andfinancing to support foreign direct investment.
✓ Bonding: Guarantee and insurance products to supportperformance bonding and surety bonds as well as foreignexchange facilities.
EDCExport Development Canada
CANADA
EFIC provides finance and insurance solutions to help Australiancompanies exporting and/or investing offshore to overcomefinancial barriers. We offer ways to unlock export finance and/orfacilitate overseas investments where their banks and/or insurersare unable to provide all the support they need.
General informationThe Export Finance and Insurance CorporationLevel 10, 22 Pitt StreetSydneyNSW 2000+61 2 8273 5333+61 2 9271 [email protected]
HistoryFounded: 1957Ownership: Wholly owned and guaranteed by the Commonwealthof Australia
Senior managementAndrew Hunter, Managing Director & [email protected]
Andrew Watson, Executive Director Export [email protected]
David Graham, Executive Director, Corporate, Sovereign and [email protected]
James Millar, Chairman of the [email protected]
John Hopkins, Board Secretary & General [email protected]
John Pacey, Chief Credit [email protected]
Stuart Neilson, Chief Financial [email protected]
Contact person(s)Chang Foo, Head of Risk Transfer & External [email protected]+61 2 8273 5431
Major facilities✓ Export finance and insurance: Direct loans; unconditional
guarantees and indemnities to financial institutions includingspecialist foreign exchange companies; medium-term paymentinsurance covering commercial and political risks; pre-shipment finance; lines of credit.
✓ Project financing: Limited-recourse lending/guarantee insupport of Australian exports to, or Australian sponsoredinvestments in, overseas projects.
✓ Political risk insurance: Cover to investors, financiers (loan andcommodity hedge providers) and contractors – CITB, wardamage and PV, expropriation/confiscation, forcedabandonment, deprivation, selective discrimination and breachof contract/arbitration award default.
✓ Bonds, sureties and guarantees: Cover against unfair calling ofbonds; issuer of contract or surety bonds, including for the USmarket.
EFICThe Export Finance and Insurance Corporation
AUSTRALIA
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Export Guarantee and Insurance Corporation is a joint-stockcompany. The offered export credit insurance with state support isin full compliance with the arrangement on officially supportedexport credits, EU law and with BU understandings. EGAP stillholds a 34% share in a subsidiary – Commercial Credit InsuranceCompany EGAP (KUPEG) – offering short-term credit insurance oncommercial terms without any state support. A 66% share is heldby DUCROIRE – DELCREDERE SA. N.V. (Belgium).
General informationExport Guarantee and Insurance CorporationVodickova 34/701Prague11121+420 222841111+420 [email protected]
HistoryFounded: 1992Ownership: EGAP is fully owned by the state. Shareholder’s rightsare exercised by Ministry of Finance (40% of votes), Ministry ofIndustry and Trade (36%), Ministry of Agriculture (12%) and Ministryof Foreign Affairs (12%).
Senior managementJan [email protected]
Miroslav SomolDeputy CEO; Claims Settlement and Dept Recovery [email protected]
Contact person(s)Hana HikelováDirector & Spokesperson; PR and Communication [email protected]+420 222 842 015
Josef JirkalDirector; International Relations [email protected]+420 222 842 530
Major facilities✓ Insurance with state support against commercial and political
risks✓ Export credit insurance (buyer and supplier credits)✓ Insurance of supplier credits financed by a bank✓ Insurance of export contract-related bonds (advance payment
bonds, bid bonds and performance bonds) against unfair andfair calling
✓ Manufacturing risks insurance✓ Pre-export financing insurance✓ Insurance of a confirmed letter of credit✓ Investment insurance✓ Insurance of a credit for financing of investments✓ Insurance of market prospection
✦ Member of The Prague Club
EGAP ✦Export Guarantee and Insurance Corporation
CZECH REPUBLIC
Euler Hermes Aktiengesellschaft (EH GERMANY – State), as a newcompany officially registered in early February 2014, has taken overall state account activities of Euler Hermes Deutschland AG. Thenew company is treated as a partial legal successor of Euler HermesDeutschland AG.
Since 1949 EH GERMANY (State) and PricewaterhouseCoopers AGhave been entrusted by the German Federal Ministry of Economicsand Energy with administering the Official Export Guarantee Scheme,for which purpose the two companies entered into a consortiumunder the lead management of EH GERMANY (State). The companyhandles short-term and medium/long-term export credit guarantees,whole-turnover policies and pre-shipment risk cover.
General informationEuler Hermes AktiengesellschaftGasstrasse 27Hamburg22761+49 40 8834 9000www.agaportal.de/[email protected]
HistoryFounded: 1917Ownership: 100% Euler Hermes S.A., Paris
Senior managementEdna SchoeneMember of the Board of Management responsible for the FederalExport Credit Guarantees
Ronald van het HofChairman of the Board of Management
Contact person(s)Hannelore B. BergsBU Matters, Issues in General
Uwe StumpenhusenBU Matters, IT and Reporting
Major facilities✓ Export Credit Insurance:
– Political and commercial risks cover for short-term andmedium-/long-term transactions;
– Special facilities available.✓ Bonds and Guarantees:
– Cover against unfair and fair calling.✓ Debt Collection
EH GERMANY (State)Euler Hermes Aktiengesellschaft
GERMANY
EKF is the official Danish export credit agency. It is an independententity under the Danish Ministry of Business and Growth. EKF offersinsurance cover for companies – national or foreign – that take riskson exports and investments containing a Danish economic interest.Goods, capital goods, turn-key projects, services and investmentsare covered by the guarantees.EKF offers both political and commercial risk cover.
General informationEksport Kredit FondenLautrupsgade 11Copenhangen2100+45 35 46 26 00+45 35 46 26 [email protected]
HistoryFounded: 1922Ownership: 100% state-owned agency with the Danish Ministry ofBusiness and Growth as the guardian authority
Senior managementAnette Eberhard, Chief Executive [email protected]
Christian Ølgaard, Deputy [email protected]
Jan Vassard, Deputy [email protected]
Lars Caspersen, Deputy [email protected]
Contact person(s)Mariane Sondergaard-Jensen, Director, International [email protected]
Major facilities✓ Export credit insurance: Political and commercial risk cover via
supplier and buyer credit facilities, lines of credit and shoppinglines.
✓ Project finance: Special project finance facility.✓ SME guarantees: Offering a buyer abroad long-term credit on
a specific export order.✓ Export loans: Loans to foreign buyers through a bank.✓ Investment guarantees: Insurance facility for emerging
markets.✓ Bond and guarantees: Cover against unfair calling.✓ Working capital guarantees: Securing credit from the bank to
pay for materials, wages and suppliers.
EKFEksport Kredit Fonden
DENMARK
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The company is market leader in Germany and part of the EulerHermes Group, Paris, the world market leader in credit insurance.EH GERMANY (Private) is owned by Allianz Group as ultimateshareholder. The company offers risk transfer solutions for theirclients to support their business development in domestic andexport markets. The products of EH GERMANY (Private) secure thefinancial stability of the customers.
General information Euler Hermes SAc/oEuler Hermes Deutschland Friedensallee 25422763 Hamburg+49 40 8834 0www.eulerhermes.de [email protected]
HistoryFounded: 1917Ownership: 100% Euler Hermes S.A., Brussels
Senior managementThomas Krings, Regional Director Risk Underwriting,Information & ClaimsIsabelle Giradet, Head of Transactional Cover Unit
Contact person(s)Uwe Kniehs, Head of Communications
Major facilities✓ Credit Insurance✓ Bonding/ Surety Business✓ Fidelity Insurance✓ Risk Management✓ Debt Collection
EH Germany (Private)Euler Hermes SA,represented by Branch Office Euler Hermes Germany
GERMANY
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The Hungarian Export Credit Insurance (MEHIB) – together with the Hungarian Export-Import Bank (Eximbank) – was established through the de-merger of Export Guarantee Insurance, in accordance with Act XLII of 1994, with the basic objective of facilitating the sale of Hungarian goods and services in foreign markets. Since 23 May 2012, Eximbank and MEHIB operate within an integrated framework and carry out their duties with a shared organisation and corporate identity, under the name of EXIM.
Both companies are solely owned by the State of Hungary, andthe ownership rights are exercised on behalf of the State of Hungary by the Ministry of Foreign Affairs and Trade.
Eximbank’s share capital is HUF 10.1 billion, and the Hungarian Stateundertakes a payment guarantee in respect of all its borrowings.MEHIB’s share capital is HUF 4.25 billion.
General informationHungarian Export-Import Bank PlcNagymezö utca 46-48BudapestH-1065+361 374 9200+361 269 [email protected]
HistoryFounded: 1994Ownership: Hungarian State directly 100%
Senior managementZoltán Urbán, CEOAndrás Puskás, Deputy CEO, Business divisionFejérvári Levente, Deputy CEO, Operations division
Contact person(s)Péter Lukács, International Relationship [email protected] +36 1 374 9288
Major facilities✓ Short-term insurance: policy with cover for commercial and
political risks including pre-shipment credit period. Cover forpurchased debts.
✓ Medium and long-term insurance: political and commercialrisks; pre-shipment and credit period; bond insurance, suppliercredit, buyer credit; lease transactions, tied aid insurance.
✓ Investment Insurance: cover also for investments abroadagainst political risks.
✦ Member of The Prague Club
EXIM HUNGARY ✦HUNGARY
EKN supports Swedish exports and the internationalisation ofSwedish business. We do this by offering exporting companies andbanks guarantees for payment and financing.
General informationExportkreditnämndenBox 3064StockholmSE-103 61+46 8 788 00 00+46 8 411 81 [email protected]
HistoryFounded: 1933Ownership: 100% governmental agency
Senior managementCarl-Johan Karlsson, Director, Small and Medium-Sized [email protected]+46 8 788 01 46
Helen Seemann, Director, Large [email protected]+46 8 788 01 05
Karin Apelman, Director [email protected]+46 8 788 00 00
Patrick Nimander, Director, [email protected]+46 8 788 01 35
Stefan Karlsson, Director, Risk Advisory & [email protected]+46 788 00 02
Contact person(s)Karl-Oskar Olming, Head of CSR & International [email protected]+46 8 788 00 05
Major facilities✓ Export credit insurance:
– Cover for commercial and political risks.– Short-term pre-shipment and credit cover.– Medium/long-term pre-shipment cover and supplier and
buyer credit facilities.✓ Project finance:
– Project finance transactions underwritten within EKN’snormal guarantee facility.
✓ Bonds and guarantees:– Cover for exporter against unfair calling.– Counter guarantee for issuer of bond against exporter risk.– Guarantee for confirmed LC.
✓ Investment insurance:– Conversion and transfer cover, war and civil war cover,
expropriation/confiscation cover.✓ Other products:
– Bill of exchange guarantee.– Working capital guarantee for SMEs.
EKNExportkreditnämnden
SWEDEN
Hungarian Export-Import Bank Hungarian Export Credit Insurance
Export-Import Bank of the Slovak Republic is the official exportcredit agency of Slovakia established by the Act No. 80/1997 Coll.as amended. Its main goal is to increase the competitiveness ofSlovak exporters at the international market via providing a widerange of export credit and investment insurance, insurance andother related financial services.
General informationExport-Import Bank of the Slovak RepublicGrösslingova 1Bratislava813 50+421 2 59398 408+421 2 52931 [email protected]
HistoryFounded: 1997Ownership: 100% sovereign
Senior managementIgor LichnovskýChairman of the Bank Board and [email protected]
Milan HorváthMember of the Bank Board and Deputy CEO for Insurance [email protected]
Pavel MockovčiakMember of the Bank Board and Deputy CEO for Banking [email protected]
Rudolf SihlovecMember of the Bank Board and Deputy CEO for Finance andEconomic [email protected]
Contact person(s)Michal DemakDirector of Export Credit [email protected]+421 2 59398 416
Silvia GavorníkováDirector of International [email protected]+421 2 59398 408
Major facilities✓ Insurance products:
– ST cover against commercial and political risks: export anddomestic receivables.
– Insurance of export guarantees, production risk, confirmedirrevocable LCs.
– Insurance of MLT export credits – suppliers’, buyers’ credit.Insurance of foreign investments.
– Insurance of pre-export financing.✓ Banking products:
– Direct loans.– Bills of exchange and promissory notes-based loans.– Discounting of exporters’ short-term accounts receivables.– Refinancing loans.– Guarantees and bonds.
✦ Member of The Prague Club
EXIMBANKA SR ✦Export-Import Bank of the Slovak Republic
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EXIM J is an independent public sector trade financing institution,which provides trade credit insurance, ST foreign currencyfinancing through foreign lines of credit and a range of ST and MTlocal currency financing programmes to the productive sector, withemphasis on the exporting sector.
General informationNational Export Import Bank of Jamaica Limited 85 Hope RoadKingston 6Jamaica W.I.+1 876 630 [email protected]
HistoryFounded: 1986Ownership: 100% government of Jamaica
Senior managementLisa Bell Managing DirectorThe Hon. William Clarke Chairman
Contact person(s)Audrey Morris Chief Officer, Operations & Insurance [email protected]+1 310 320 4760
Shernett Manning Chief Officer, Operations and Insurance [email protected] +1 310 320 476
Major facilities✓ Trade credit insurance: The bank provides the Jamaican
productive sector with ST insurance protection against non-payment by foreign and local buyers. The trade creditinsurance policy covers both commercial and political risks, toa maximum of 85% and 90% respectively.
✓ Export financing: The bank offers ST working capital financingto the exporting sector through pre and post-shipmentfacilities. MT loan facilities are also offered to the tourismsector, a major earner of foreign exchange, for facilitiesupgrading, and to the exporting sector for retooling andupgrading.
EXIM JNational Export Import Bank of Jamaica
JAMAICA
✓ FacilitatImport financing: Fe the procuroreign currement of importency loans ared raw mate granted toerial, equipment and machinery for the productive sector.
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Specialised financing company FINNVERA has two roles in theFinnish economy: it is the official Finnish export credit guaranteeagency (ECA) offering a full range of export credit guaranteeproducts to promote exports and internationalisation ofenterprises, and a domestic risk financier promoting the activitiesof small and medium-sized companies. FINNVERA’s subsidiary FECoffers interest rate equalisation at CIRR rates, and can fund exportcredits arranged by commercial banks. All services are availablethrough FINNVERA.
General informationFinnvera plcContact: PO Box 1010, 00101 Helsinki, FinlandVisiting address: Eteläesplanadi 8, Helsinki, FinlandHelsinki 00101+358 204 6011+358 294 60 [email protected]
HistoryFounded: 1963Ownership: 100% state-owned
Senior managementAnita Muona, Managing Director, [email protected]
Eeva-Maija Pietikäinen, Head of Trade [email protected]
Jussi Haarasilta, Executive [email protected]
Pauli Heikkilä, [email protected]
Raija Rissanen, Vice-President, Country [email protected]
Topi Vesteri, CCO, Deputy [email protected]+358400702002
Tuukka Andersén, Vice-President, Head of [email protected]
Contact person(s)Pekka Karkovirta, [email protected]
Major facilities✓ Export credit insurance:
– Cover for credit and pre-credit risks against commercial andpolitical risks
– Short-term credit insurance– Medium and long-term insurance for supplier and buyer
credit transactions including project finance✓ Investment insurance: Cover provided against political risks✓ Bonds and guarantees: Counter security for banks on behalf of
exporter (fair calling of the bond) and risk insurance forexporter (unfair calling of the bond or calling of the bond dueto political reasons)
✓ Financing of export credits and interest equalisation servicesvia Finnish Export Credit (FEC)
FINNVERAFinnvera Plc
FINLAND
FCIA Management Company (FCIA) and its associatedorganisation, the Foreign Credit Insurance Association, haveprovided trade credit and political risk insurance since 1961. FCIA, awholly owned subsidiary of Great American Insurance Company(GAIC) since 1991, underwrites and services Great American’s broadline of trade credit and political risk insurance products, offeringboth cancellable and non-cancellable limit policy options. GAIC isthe insurer on policies underwritten by FCIA and is rated A+ by S&P.
General informationFCIA Management Company, Inc125 Park Avenue, 14th floorNew YorkNY 10017+1 212 885 1500+1 212 885 [email protected]
HistoryFounded: 1961 (Foreign Credit Insurance Association)Ownership: Great American Insurance Company
Senior managementCarol G McEvoy Senior Vice-President – General Counsel
Kenneth J Cavanagh Senior Vice-President
Lindley M Franklin President & CEO
Philip Lally Executive Vice-President [email protected]
Contact person(s)Lindley M Franklin President & CEO
Nasrin Nourizadeh Vice-President – Business Development [email protected]
Major facilities✓ Trade Credit Insurance for Companies: Insurance against
non-payment of accounts receivable. Coverage for multiplebuyers or single buyers, export and/or domestic sales, pre-shipment and post-shipment risks, short-term and medium-term tenors.
✓ Trade Financing Insurance for Financial Institutions: Coveragefor confirmation of LCs issued by foreign banks,import/export/pre-export financings, purchased receivablesand trade payables financings.
✓ Political Risk Insurance: Coverage for contract frustration,wrongful calling of advance payment and other bonds andinvestor losses on foreign assets caused by confiscation,expropriation, nationalisation, political violence and other perilscustomised to meet transaction requirements. Policy periodsup to seven years.
FCIAFCIA Management Company, Inc
USA
Hiscox, headquartered in Bermuda, is a specialist insurer, underwritinga particular range of personal and commercial risks. Our focus givesus two significant and distinctive advantages. First, we can ofteninsure risks other companies find too complex or unusual to cover;second, we can tailor policies very closely to the individual customer’srequirements. This combination of selectivity and exceptionalexpertise has, over the course of a century, driven us from a singleunderwriter based at Lloyd’s into a FTSE 250 company with officesin 14 countries and customers around the world.
General informationHISCOX1 Great St HelensLondonEC3A 6HX+44 (0)20 7448 6617+44 (0)20 7448 [email protected]
HistoryFounded: 1901Ownership: Public Limited Company
Contact person(s)Claire SimpsonHead of Political [email protected]
Victoria PadfieldDeputy Head of Political [email protected]
Major facilitiesWe offer insurance protection for trade finance, commodityfinance, export finance and other structured credit transactions.Cover can be tailor made to add pre-shipment perils and the unfaircalling of on demand bonds. We also cover investment insuranceand political violence including war and terrorism.
HISCOXHiscox
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GIEK is to promote exports of Norwegian goods and services, andNorwegian investments abroad. GIEK issues guarantees andinsurances on behalf of the Norwegian government.
General informationGarantiinstituttet for eksportkredittMailing address: PO box 1763 Vika, 0122 OsloVisiting address: Dronning Mauds gate 15, OsloOslo 0122+47 22 87 62 00+47 22 83 24 [email protected]
HistoryFounded: 1929Ownership: GIEK is an independent governmental enterprise.
Senior managementBritt Skåtun, Director [email protected]
Cay Bakkehaug, [email protected]
Elizabeth Lee Marinelli, Director Legal and Risk [email protected]
Øyvind Ajer, Director Underwriting, Deputy [email protected]
Solveig Frøland, Director Shipping, Yards and Offshore [email protected]
Ulla Wangestad, Director Strategic [email protected]
Wenche Nistad, [email protected]
Contact person(s)Cecilie Grønntun, Senior [email protected]+4790652638
Major facilities✓ Cover for credit and pre-credit risks✓ Investment insurance✓ Counter guarantees for bonds✓ Working capital scheme for ships and devices at sea✓ Short-term credit insurance is carried out by our subsidiary:
GIEK Kredittforsikring AS, tel: +47 46 87 20 00, visitingaddress: Rådhusgata 25, 0158 Oslo Norway, fax: +47 22 83 7358, [email protected]; www.giekkreditt.no
GIEKGarantiinstituttet for eksportkreditt
NORWAY
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ICIEC, Aa3 rated, is a member of the IDB Group. Established inAugust 1994 as an international institution with full juridicalpersonality, ICIEC’s objective is to increase the scope of tradetransactions from OIC member countries, and to facilitate foreigndirect investment into these countries by providing export creditand investment insurance/ reinsurance facilities to its customers inmember countries.
General informationThe Islamic Corporation for the Insurance of Investment and ExportCreditPO Box 15722Jeddah21454+966 2 644 5666+966 2 637 [email protected]
HistoryFounded: 1994Ownership: The authorised capital of ICIEC is $620 million, subscribedby the Islamic Development Bank (IDB) and 40 member countriesof the Organisation of the Islamic Conference (OIC).
Senior managementAdil A. Babiker Director Legal Affairs
Dr Abdel-Rahman El -Tayeb Taha Chief Executive Officer
Dr Ahmed Mohamed Ali Chairman of the Board
Khemais El-Gazzah Chief Operating Officer [email protected]
Muhammad Azam Arif Director, Accounts and Finance
Contact person(s)Eng Yasser Alaki Acting Director, Business Development Dept. [email protected]
Jamel Eddine Naga Head of Promotion & International Relations Unit [email protected]
Mourad Mizouri Acting Head of Customer Relations Division [email protected]
Major facilitiesICIEC provides the following facilities in accordance with theprinciples of shariah:✓ Export credit insurance: ICIEC offers services to exporters and
banks in ICIEC member countries for both short-term andmedium-term (up to seven years) covering commercial andpolitical risks.
✓ Foreign investment insurance: ICIEC offers cover to investorsand financiers of the projects from anywhere in the world toinvest into ICIEC member countries.
✓ Reinsurance services: ICIEC offers reinsurance services toECAs and commercial insurance companies in ICIEC membercountries and can also participate with international ECAs.
✦ Member of The Prague Club
ICIEC ✦The Islamic Corporation for the Insurance ofInvestment and Export Credit
MULTILATERAL
The Hong Kong Export Credit Insurance Corporation (HKEC) wascreated by statute in 1966 to protect Hong Kong exporters againstnon-payment risks arising from commercial and political events.Its contingent liability under contracts of insurance is guaranteedby the Government of the Hong Kong Special AdministrativeRegion, with the statutory maximum liability currently standing atHK$40bn.
HKEC provides a wide range of insurance facilities covering exportof goods and services on credit periods up to 180 days. HKEC alsoprovides tailor-made facilities to cater for the varying needs ofdifferent export sectors. For export of capital goods, HKEC mayoffer medium and long-term cover for credit periods up to fiveyears or beyond.
General informationHong Kong Export Credit Insurance Corporation2/F, Tower 1, South Seas Centre, 75 Mody Road, Tsimshatsui EastKowloon+852 2723 3883+852 2722 [email protected]
HistoryFounded: 1966Ownership: A statutory corporation under the Government of theHong Kong Special Administrative Region
Senior managementAmy WaiDeputy General Manager
Ralph LaiCommissioner
Contact person(s)Iyria FanDeputy General [email protected]
Major facilities✓ Export credit insurance (supplier credit)✓ Short-term (up to one year) / Medium and long-term (over
one year) cover: commercial and political risks; pre-shipmentand post-shipment cover.
HKECHong Kong Export Credit InsuranceCorporation
HONG KONG
Export Credit Insurance Corporation Joint Stock Company (KUKE)is the official export credit agency of the Republic of Poland, whichon the basis of the Act on export insurance guaranteed by the StateTreasury administers officially supported export insurance scheme.KUKE’s mission is to support exporters and institutions financingsupplies of Polish goods and services, by providing insurance andguarantees that allow Polish exporters to win foreign markets andto provide efficient and tailor-made service for them. KUKE alsoprovides standard cover for short-term export and domesticreceivables on the company’s own account.
General informationKUKE S.A.39 Sienna StreetWarsaw, 00-121Poland+48 22 35 68 [email protected]
HistoryFounded: 1991Ownership: The State Treasury represented by the Minister of Finance – 63,31%, State Economy Bank – 36,69%
Senior managementDariusz Poniewierka, President, [email protected] Hanzel, Vice-PresidentPiotr Stolarczyk – Vice-President
Contact person(s)Agnieszka Zoltowska, Chief [email protected]
Major facilities✓ Export credit insurance✓ Short-term cover: marketable and non-marketable risk✓ Medium and long-term cover: supplier credit and buyer credit facilities✓ Investment insurance✓ Bonds and guarantees✓ Domestic credit insurance
✦ Member of The Prague Club
KUKE ✦Export Credit Insurance Corporation
POLAND
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Korea Trade Insurance Corporation (K-sure) was established in July1992 as the official export credit agency of Korea pursuant to theExport Insurance Act of 1968 with the mission to support exports,thereby contributing to the national economy. Under the supervisoryauthority of the Ministry of Knowledge Economy, K-sure protectsKorean business in their export and overseas investment activitiesthrough its export credit insurance, overseas investment insurance,credit guarantees and various other programmes and services.
General informationKorea Trade Insurance Corporation6th Floor, Seoul Central Bldg, 136 Seorin-dong, Jongno-guSeoul110-729+82 2 399 6800/6801+82 2 399 [email protected]
HistoryFounded: 1992Ownership: 100% state-owned
Senior managementKim KyungchulHead of International [email protected]+82 2 399 6919
Contact person(s)Kim KyungchulHead of International [email protected]+82 2 399 6919
Sunghyun ParkAssistant [email protected]+82 399 7441
Major facilities✓ Export credit insurance: Short-term (up to two-years) cover,
Medium and long-term (over two years).✓ Working capital guarantee.✓ Investment insurance: Cover offered: transfer; war
expropriation breach of contract.✓ Bonds and guarantees: Bid Bond; AP Bond; P Bond etc.
KSUREKorea Trade Insurance Corporation
KOREA
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MIGA, a member of the World Bank Group, was established topromote foreign direct investment into emerging economies toimprove people’s lives and reduce poverty. MIGA encouragesinvestment by providing investors and lenders protection againstnon-commercial risks through its political risk insurance.
MIGA has issued over $27 billion in guarantee coverage in morethan 100 developing member countries. MIGA can cover equityinvestments, shareholder loans, shareholder loan guarantees, andnon-shareholder loans. Investment projects must be financially andeconomically viable and meet MIGA’s social and environmentalperformance standards.
General informationMultilateral Investment Guarantee AgencyWorld Bank Group, 1818 H StreetNW, Washington, DC,20433+1 202 458 2538+1 202 522 [email protected]
HistoryFounded: 1988Ownership: MIGA is owned by 179 member countries.
Senior managementEdith P. QuintrellDirector of [email protected]+1 202 473 7723
Contact person(s)Marc RoexHead [email protected]+1 202 458 0354
Major facilitiesThrough its investment guarantees, MIGA offers protection forcross-border investments against the following non-commercialrisks: transfer restriction; expropriation; war and civil disturbance;breach of contract; and non-honoring of sovereign financialobligations.
MIGAMultilateral Investment Guarantee Agency
MULTILATERAL
Eximbank of Malaysia provides insurance, guarantee and financingfacilities to Malaysian exporters and investors as well as foreignbuyers of Malaysian products and services. Eximbank of Malaysiahas various financing programmes providing short- to long-termcredit to help promote Malaysian exports.
General informationExport-Import Bank of Malaysia BerhadExport-Import Bank of Malaysia Berhad Aras 1, Exim Bank JalanSultan Ismail P.O.Box 13028Kuala Lumpur50250+603 26012000+603 [email protected]
HistoryFounded: 1977 (MECIB)Ownership: 100% owned by the Ministry of Finance
Senior managementDatuk Mohd Hashim b Hassan, [email protected]
Mr Aminuddin Bashah, Chief Credit [email protected]
Mr Chairil Mohd Tamil, Chief Business [email protected]
Ms Norlela Suleiman, Chief Financial [email protected]
Ms Norzilah Mohammed, Chief Operating Officer/Acting [email protected]
Zulkefli Samat, Chief Risk [email protected]
Contact person(s)Khoo Kah Jin, [email protected]
Zabedah Giw, [email protected]+603 260 1 2000
Major facilities✓ Export credit insurance:
– Short-term (up to one-year) cover: Commercial and politicalrisks; pre-shipment cover; credit and domestic cover.
– Medium/long-term (over one year): Supplier and buyercredit facilities; line of credit.
✓ Project finance: Special project finance facility.✓ Investment insurance: Cover: conversion/transfer cover; war
and civil disturbance; expropriation/confiscation; breach ofcontract by host government.
✓ Bonds and guarantees: Cover: conversion/transfer cover; warand civil disturbance; expropriation/confiscation; breach ofcontract by host government.
MEXIMExport-Import Bank of Malaysia Berhad
MALAYSIA
The ODL, Luxembourg’s One-Stop Shop for exporters, is designed to support Luxembourg exporters while trading internationally, mainly by providing credit insurance schemes for exports, imports and investments abroad. Since the co-operation agreement of April 29, 2002 between the ODL and the Luxembourg Government, establishing the COPEL (Comitépour la promotion des exportations luxembourgeoises), the ODL supports Luxembourg exports by means of a partial contribution in the promotion, exhibition and export training expenses.Furthermore, the ODL performs its assignment of supporting Luxembourg exports in participating in external trade instrumentssuch as « Luxembourg for Business ».
General informationLuxembourg Export Credit Agency Mailing Address: L-2981 Luxembourg Visiting Address: 7, rue Alcide de Gasperi, L-1615 LuxembourgCity: Luxembourg+352 42 39 39 320+352 42 39 39 [email protected]
HistoryFounded: 1961Ownership: The ODL is an autonomous public institution
Senior managementArsène JACOBY, [email protected]+35224782709
Contact person(s)Simone Joachim, Secretary [email protected]+352423939342
Major Facilites✓ Export credit insurance (short, medium and long-term)✓ Foreign investment insurance
Other activitiesPromotion of Luxembourg exports by financial supports through the COPEL (Committee for the promotion of Luxembourg exports) onbehalf of the Ministry for Foreign Trade.
ODLLuxembourg Export Credit Agency
LUXEMBOURG
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Nippon Export and Investment Insurance (NEXI) is an incorporatedadministrative agency formed on 1 April, 2001 under the Trade andInvestment Insurance Act.
NEXI was launched as a successor to the trade and investmentinsurance administered by the Japanese government, although asthe authority the government (Ministry of Economy, Trade andIndustry) retains ultimate responsibility.
NEXI commits itself to contributing to the economy and society ofJapan through efficient and effective insurance businessoperations.
NEXI does this by responding precisely to customers’ needs with aquick perception of market changes and by underwriting the risksinherent in international transactions that cannot be adequatelyprotected by conventional insurance.
General informationNippon Export Investment InsuranceChiyoda First Building, East Wing 3rd Floor, 3-8-1, Nishi- Kanda, Chiyoda-kuTokyo 101-8359+81 3 3512 7655+81 3 3512 [email protected]
HistoryFounded: 2001Ownership: 100% state-owned
Senior managementKazuhiko Bando, Chairman and [email protected]
Satoru Koyama, [email protected]
Tadaharu Uehara, [email protected]
Tetsuya Koizumi, [email protected]
Contact person(s)Yoshitaka Fukushima, Assistant [email protected]+81 3 3512 7734
Major facilities✓ Export credit insurance: Insurance for export, intermediary
trade, and technical cooperation, insurance for export oflicences, insurance for loans (buyer’s credit).
✓ Insurance for project finance: Special project financingfacilities.
✓ Investment insurance and untied loan insurance: Cover offered:conversion/transfer cover; war and civil war cover;expropriation/confiscation cover; force majeure events cover;breach of contract cover.
✓ Bonds and guarantees: Cover against unfair calling.
NEXINippon Export and Investment Insurance
JAPAN
Corporate description:
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OPIC is the US Government's development finance institution. Itmobilises private capital to help solve critical developmentchallenges and in doing so, advances US foreign policy and nationalsecurity objectives. Because OPIC works with the US private sector,it helps US businesses gain footholds in emerging markets,catalysing revenues, jobs and growth opportunities both at homeand abroad. OPIC achieves its mission by providing investors withfinancing, guarantees, political risk insurance, and support forprivate equity investment funds.
General informationOverseas Private Investment Corporation1100 New YorkInsurance DepartmentWashington [email protected]
HistoryOPIC was established as an agency of the US Government in 1971.OPIC operates on a self-sustaining basis at no net cost to Americantaxpayers. OPIC services are available for new and expandingbusiness enterprises in more than 150 countrries worldwide. Todate, OPIC has supported more than $200 billion of investment inover 4,000 projects, generated an estimated $76 billion in USexports and supported more than 278,000 American jobs.
Senior managementElizabeth L. Littlefield, President and CEO [email protected], 202-336-8400
John E. Morton, Chief Operating Officer [email protected], 202-336-8400
John F. Moran, Vice President, Insurance [email protected], 202-336-8674
Cindy Shepard, Associate General Counsel, Insurance [email protected], 202-336-8435
Contact person(s)Diane M. Ferrier, Berne Union Admin [email protected], 202-336-8596
JoAnn Young, Office Manager, Insurance [email protected], 202-336-8577
John F. Moran, Vice President for Insurance and Berne Union [email protected], 202-336-8674
Major facilities✓ INSURANCE: while developing markets can offer great
opportunity, they can also present a variety of political risksbeyond an investor's control. OPIC's political risk insuranceprovides innovative, comprehensive, and cost effective riskmitigation products to cover losses to tangible assets,investment value, and earnings that result from political perils.
✓ FINANCE: OPIC financing provides medium-to-long termfunding through direct loans and loan guarantees to eligibleinvestment projects in developing countries and emergingmarkets. By complementing the private sector, OPIC canprovide financing in countries where conventional financialinstitutions often are reluctant or unable to lend.
✓ INVESTMENT FUNDS: OPIC also provides support for thecreation of privately-owned and managed investment funds.These funds make direct equity and equity-related investmentsin new, expanding or privatising emerging market companies.
OPICOverseas Private Investment Corporation
USA
OeKB is a joint-stock company providing export-related servicesand carrying out capital market activities. In the field of exportcredit and investment insurance, OeKB operates on thegovernment’s account as agent of the Republic of Austria, coveringnon-marketable risks only. The refinancing facilities offered tofinancial institutions are operated on OeKB’s own account.
ST credit insurance (up to 24 months) is carried out by the privatecredit insurer Acredia Versicherung AG (51% subsidiary of OeKB,brands: OeKB Versicherung and PRISMA Die Kreditversicherung.OeKB also holds a majority stake in “Österreichischer Exportfonds”GmbH and 100% of Oesterreichische Entwicklungsbank AG(OeEB), which acts as the official development bank of Austria,mandated by the Austrian Government.
General informationOesterreichische Kontrollbank AktiengesellschaftAm Hof 4ViennaA-1011+43 1 531 27 0+43 1 531 27 [email protected]
HistoryFounded: 1946Ownership: Commercial banks
Senior managementAngelika Sommer-HemetsbergerMember of the Board of Executive [email protected]
Ferdinand SchipferDirector, Head of Export Guarantees [email protected]
Rudolf ScholtenMember of the Board of Executive [email protected]
Sylvia Doritsch-IseppDirector, Head of Research, Analyses & International [email protected]
Contact person(s)Sylvia Doritsch-IseppDirector, Head of Research, Analyses & International [email protected]
Major facilities✓ Export credit insurance for capital goods: Multiple or single
transactions; supplier and buyer credits; commercial andpolitical risks; pre-shipment and credit risks.
✓ Project finance: Special project finance facility.✓ Investment insurance: Cover offered against risk of
expropriation/confiscation; war and civil war as well as non-conversion/non-transfer.
✓ Bonds and guarantees: Cover against unfair calling.
OeKBOesterreichische KontrollbankAktiengesesllschaft
AUSTRIA
Margaret L. Kuhlow, Vice President, Office of Investment Policy, [email protected], 202-336-8468
General informationSACEPiazza Poli 37/42Rome00187+39 06 67 361www.sace.it
HistoryFounded: 1977Ownership: Cassa Depositi e Prestiti (CDP)
Senior managementAlessandro Castellano, Chief Executive OfficerRoberto Taricco, Chief Financial OfficerAlessandra Ricci, Chief Business Officer
Contact person(s)Michal Ron, Head of International [email protected]
Major facilitiesEXPORT CREDIT - We support the purchases of Italian goods and services by guaranteeing or insuring medium- and long-term loans to i nternational buyers. Loans may be denominated in euro, U.S. dollars or select foreign currencies.
SACESace
ITALY
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Since 1959, PricewaterhouseCoopers AG Wirtschaftsprüfungs -gesellschaft, together with Euler Hermes Aktiengesellschaft, hasbeen entrusted by the German Federal Ministry for EconomicAffairs and Energy with administering the federal government’sOverseas Investment Insurance Scheme. For this purpose the twocompanies entered into a consortium under the lead managementof PwC. PwC is a leading auditing and consulting firm in Germanyand an independent member of the international PwC network.
General informationPricewaterhouseCoopers AGNew-York-Ring 13Hamburg22297+49 40 8834 9451+49 40 8834 [email protected]
HistoryFounded: 1922Ownership: Senior Management (Partners), 100%
Senior managementNorbert [email protected]
Contact person(s)Michael [email protected]+49 40 8834-9452
Markus Lö[email protected]+49 40 8834-9477
Nicole HauboldSenior [email protected]+49 40 8834-9462
Major facilities✓ Investment insurance. Cover offered: conversion/transfer cover,
war/civil war cover, expropriation/confiscation cover andbreach of host country commitments.
PwCPricewaterhouseCoopers AG
GERMANY
SACE is a leading provider of export credit, credit insurance, foreign investment protection services, financial guarantees, sureties and factoring services.
With operations worth over €76 billion assured in 189 countries, SACE supports the competitiveness of Italian and foreign businesses, guaranteeing more stable cash flows and transforming insolvency risks into development opportunities.
The experience acquired in over 30 years of activity in international markets enables SACE to identify and assess risks to support customers even in challenging conditions.
Its close-knit yet globally distributed network covers major emerging and industrialised markets, to meet the needs of 25,000 businesses worldwide.
Headquartered in Italy, SACE has representative offices in Bucharest, Dubai, Hong Kong, Istanbul, Johannesburg, Mexico City, Moscow, Mumbai and Sao Paulo, as well as an operative desk in Nairobi (c/o ATI).
✓
STRUCTURED & PROJECT FINANCE - We guarantee non-recourse or limited-recourse loans to finance major international capital projects involving Italian exporters and projects of strategic importance for the Italian economy in sectors such as infrastructure and renewable energy.
✓
INTERNATIONALISATION - We help Italian enterprises access financing to support their international development, by guaranteeing loans granted for export-related activities or foreign investments. We also protect their investments abroad against political risks.
✓
SURETY - We offer guarantees to cover the contractual and legal obligations of companies participating in tenders and suppliers that win orders in Italy and abroad. We also provide construction risk insurance.
✓
CREDIT INSURANCE - We provide Italian exporters with a variety of credit insurance policies, enabling international buyers of Italian goods and services to benefit from extended credit terms.
✓
FACTORING - We offer recourse and non-recourse factoring, with a specific range of services for suppliers to public sector customers.
✓
ADVISORY SERVICES - Among others services we advise ECA’s in emerging markets and others financial institutions, providing training programs aimed at transferring own experience and know how.
✓
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SERV insurances protect Switzerland’s exporters from all industries and financial institutions from the risk of default. SERV insures the financing of exports of consumer and capital goods as well as services. As an institution of the Swiss Confederation under public law, SERV’s activities focus exclusively on areas of the credit insurance market that are not served by private insurers or only to a limited degree. SERV’s main objective is to create and preserve Swiss jobs and to help Switzerland’s export industry to compete successfully around the world.
General informationSERV Swiss Export Risk InsuranceZeltweg 638032 ZurichSwitzerland+41 58 551 55 [email protected]
HistoryFounded: Export Risk Guarantee ERG in 1934. On 1 January 2007, ERG was replaced by SERV.Ownership: Institution of the Swiss Confederation under public law
Contact person(s)Robert Suter, Head of International Relations & Projects [email protected]+41 58 551 55 49
Major facilities✓ Export credit insurance – supplier or buyer credit insurance✓ Pre-shipment risk insurance✓ Letter of credit confirmation insurance✓ Contract bond insurance and counter guarantee✓ Working capital insurance✓ Confiscation risk insurance✓ Refinancing guarantee
SERVSwiss Export Risk Insurance
SWITZERLAND
SID Bank is an export and development bank and the nationalexport credit agency (ECA) which performs insurance against non-marketable risks on the state account, as well as promotional anddevelopment activities in the area of international trade,entrepreneurship, development, research and innovation, ecology,energy, and infrastructure, with the primary aim to cover marketgaps in the mentioned areas. By supporting development projects,ensuring safety in the internationalisation of operations andproviding all modern financial services in one place, SID Bankencourages Slovene companies to exploit the opportunities forinternational economic and development cooperation.
SID Bank subsidiaries are: SID – First Credit Inusrance Company,Ljubljana (short-term credit insurance against marketable risks),Pro Kolekt (debt collection agency), Prvi faktor (factoring services)and CMSR – Centre for International Cooperation and Development(country risk analysis).
General informationSID BankUlica Josipine Turnograjske 6LjubljanaSI-1000+386 1 200 7500+386 1 200 [email protected]
HistoryFounded: 1992Ownership: 100% state-owned
Senior managementSibil SvilanPresident of the Management Board & [email protected]
Jožef BradeškoMember of the Management [email protected]
Contact person(s)Matjaz MusicCredit Insurance [email protected]
Major facilities✓ Export credit insurance: ST/MLT commercial and non-
commercial non-marketable risks, pre/post-shipment cover✓ Investment insurance: Conversion/transfer risk,
expropriation/confiscation risk, war/civil unrests, breach ofcontract, denial of justice, catastrophic risk, commercial risk
✓ Cover of bonds✓ Financing: Supplier/buyer credits and credit lines; financing
exports, SMEs, environmental protection, research, sustainabledevelopment projects, etc
✦ Member of The Prague Club
SID ✦SID Inc, Ljubljana
SLOVENIA
China Export & Credit Insurance Corporation (SINOSURE) is astate-funded policy-oriented insurance company, with anindependent status of legal person, established for promotingChina’s foreign trade and economic co-operation. SINOSURE’sservice network comprises 24 business offices nationwide and anoverseas representative office in London, UK.
General informationChina Export & Credit Insurance CorporationNorth Wing, Fortune Times Building, No 11 Fenghuiyuan, Xicheng DistrictBeijing100033+86 10 6658 2288+86 10 6651 [email protected]
HistoryFounded: 2001Ownership: State-owned
Senior managementHuang Zhiqiang, [email protected]
Luo Xi, [email protected]
Nie Qingshan, [email protected]
Wang Yi, [email protected]
Xie Zhibin, [email protected]
Xu Aiting, Chief Compliance [email protected]
Yin Yanhui, [email protected]
Zha Weimin, [email protected]
Zhou Liqun, Chairman of Board of [email protected]
Contact person(s)Li Yifan, Berne Union Division, International [email protected]
Pu Yu, Berne Union Division, International [email protected]
Sun Yifeng, Division Manager, Berne Union Division, [email protected]
Wan Haoyun, Berne Union Division, International [email protected]
Zhu Lei, Berne Union Divsion, International [email protected]
Major facilities✓ Export credit insurance✓ Investment insurance✓ Domestic trade credit insurance✓ Bond and guarantee✓ Debt collection service✓ Credit rating service
SINOSUREChina Export & Credit Insurance Corporation
CHINA
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The Sri Lanka Export Credit Insurance Corporation (SLECIC) wasestablished by Act No 15 of 1978 and commenced operations on 8 February, 1979. The main objective of SLECIC is to providesupport services of export credit insurance and guarantees for thedevelopment of exports from Sri Lanka. SLECIC’s comprehensiveexport credit solutions help exporters to compete in more than 100countries including high-risk and emerging markets.
General informationSLECICLevel 4, DHPL Building, Export Guarantee House, No 42, Nawam MawathaColombo 2+94 11 5378161 65 or +94 11 4883561 64+94 11 [email protected]
HistoryFounded: 1978Ownership: Government-backed export credit agency
Senior managementA.S.M. Misbah, Chairman & Managing [email protected]
D.P. Aluthge, Assistant General [email protected]
Dilruk Ranasinghe, General [email protected], +94 112 307 606
Mayuri Mudalige, Assistant General [email protected]
R.M.U.N Peiris, Deputy General [email protected]
S.M.T Silva, Assistant General [email protected]
Contact person(s)Dilruk Ranasinghe, General [email protected]+94 112 307 606
Major facilities✓ Export credit insurance (seller’s risk): Short-term (up to 180
days) cover against commercial and political risks. Wholeturnover and specific insurance policies. Tailor-made insurancepolicies where cover is available for export of services,entrepot trade and consignment stocks as well.
✓ Export credit guarantees: Whole turnover credit guarantees(WTG) that underwrite the entire short-term export financeportfolios of commercial banks. Individual export productioncredit guarantees and pre and post-shipment creditguarantees to enable exporters to obtain working capital frombanks. Credit guarantees to banks that enable migrant workersto obtain pre-departure loans from banks (APARA).
✓ Export performance guarantees: Counter-guarantees to bankson account of exporters covering bid bonds, performancebonds etc. Demand guarantees to the International Chamberof Commerce of Sri Lanka (ICC) covering the ATA CarnetSystem. Demand counter-guarantees to banks on account offreight forwarders covering their commitments to airlines.
✓ Other services: Providing financial status reports tocommercial banks (Bizinfo). Debt collection service.
SLECICSri Lanka Export Credit Insurance Corporation
SRI LANKA
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Sovereign Risk Insurance is one of the world’s leading providers ofmedium/long-term political risk insurance and sovereign creditinsurance for commercial banks, investment banks, capital marketsand equity investors. Sovereign is also very active in supportingECAs and multilateral agencies with co-insurance and re-insurance.
General informationSovereign Risk Insurance Ltd17 Woodbourne AvenueHamiltonHM 08+1 441 296 4279+1 441 296 [email protected]
HistoryFounded: 1997Ownership: ACE Bermuda Insurance Ltd, a wholly-owned subsidiaryof ACE Limited
Senior managementBarker Keith, General [email protected]+1.441.298-8051
Christina Westholm-Schroder, Chief [email protected]+1.441.298-8055
Natalie Luthi, SVP & Senior [email protected]+1.441.298-8057
Price Lowenstein, President & [email protected]+1.441.298-8056
Contact person(s)Christina Westholm-Schroder, Chief [email protected]+1.441.298-8055
Major facilities✓ Sovereign and Sub-Sovereign Non-Payment: Non-payment by
sovereign and sub-sovereign borrowers, and non-honouring ofsovereign and sub-sovereign guarantees. Maximum line perproject: $80 million; maximum tenor: 15 years.
✓ Investment Insurance: Currency inconvertibility, non-transferand expropriation of funds, political violence, expropriatoryactions (direct and creeping), breach of contract, wrongfulcalling of on-demand guarantees, licence/concessioncancellation, embargo and other customised political risks.Maximum line per project: $80 million; maximum tenor: 15years.
SOVEREIGN RISKSovereign Risk Insurance Limited
BERMUDA
TEBC is the official export credit agency of Chinese Taipei. Thebank’s mission is to promote economic development and enhanceinternational co-operation. TEBC’s operations are, amongst others,to assist local firms in expanding external trade, and to engage inoverseas investments. It does not compete with commercial banksin providing financial services. TEBC offers financial solutions tofacilitate the export of capital goods and services, overseasinvestments, etc. These financial solutions include export creditinsurance and overseas investment insurance since 1979. Theseinsurance services are used to protect exporters againstcommercial and political risks. TEBC has also offered loans orguarantees on a short, medium and long-term basis.
General informationTaipei Export-Import Bank of ChinaHead Office, 8th Floor, No 3, Nanhai RoadChinese Taipei+886 2 2321 0511+886 2 2357 [email protected]
HistoryFounded: 1979Ownership: 100% government-owned
Major facilities✓ Export credit insurance: Short-term (up to one-year)/medium
and long-term cover: Commercial and political risks.✓ Investment insurance: Conversion/transfer cover; war and civil
war cover; expropriation/confiscation cover.✓ Export finance: As direct lender; short, medium and long-term
export finance.✓ Guarantees: Bid bonds; performance bonds; bonds/guarantees
issued.
TEBCTaipei Export-Import Bank of China
CHINESE TAIPEI
Export-Import Bank of Thailand (THAI EXIMBANK) is a financialinstitution wholly-owned by the Royal Thai Government under thesupervision of the Ministry of Finance. The bank’s main objective isto serve the financial needs of Thai exporters, Thai investmentsoverseas, and other businesses earning or saving foreign exchange.THAI EXIMBANK provides financial services customary tocommercial bank practices, except for accepting deposits from thegeneral public.
General informationExport-Import Bank of Thailand1193 Exim Building, Phaholyothin Rd, PhayathaiBangkok10400+662 271 3700, +662 278 0047, +662 617 2111+662 271 [email protected]
HistoryFounded: 1993Ownership: Royal Thai Government 100%
Senior management Mr. Kematat Saicheur Acting President
Mr. Jarupat PanityingFirst Vice President, Export Credit Insurance Department
Contact person(s)Jarupat PanityingFirst Vice-President, Export Credit Insurance [email protected]+00662 271 3700
Major facilities✓ Financial services similar to those offered by commercial
banks:– Revolving credits for exports– Negotiation of export bills– Term loan for business expansion
✓ Other specialised financial facilities to support Thai exportersor investors investing abroad:– Export credit insurance– Short-term (less than 180 days)– Medium and long-term (up to five years)– Investment insurance– Merchant marine financing
✦ Member of The Prague Club
THAI EXIMBANK ✦Export-Import Bank of Thailand
THAILAND
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Turk Eximbank is a fully state-owned bank acting as the Turkishgovernment’s major export incentive instrument in Turkey’ssustainable export strategy. As Turkey’s official export creditagency, Turk Eximbank has been mandated to support foreigntrade and Turkish contractors/investors operating overseas.
Turk Eximbank’s main objectives are promoting Turkey’s exportsthrough diversification of exported goods and services byincreasing the share of Turkish exporters in international trade,finding new markets for traditional and non-traditional exportgoods and providing exporters and overseas contractors withsupport to increase their competitiveness and to ensure a risk-freeenvironment in international markets.
General informationTurk EximbankSaray Mh. Ahmet Tevfik İleri Sk.No19 UmraniyeIstanbul34768+90 (216) 666 55 00+90 (216) 666 55 [email protected]
HistoryFounded: 1987
Senior managementEnis GültekinDeputy General [email protected]
Contact person(s)Banu Erkok, [email protected]
Kerime Aycan Ertugrul, Assistant [email protected]
Major facilities✓ Export Credit Insurance: Short-term (up to one year) cover:
commercial and political risks; pre and post shipment cover.✓ Medium and long-term (over one year) cover: commercial and
political risks; pre and post shipment cover.✓ Domestic Credit Insurance: Short-term (up to one year):
commercial risks, post shipment cover.✓ Project Loans: Project loans extended to various countries for
capital goods exports and turn-key contracts of Turkishcompanies. Domestic Investment Loans for export-orientedprojects
✓ Export Finance: As direct lender; pre-shipment finance;working capital facility, various special-purpose facilities andforeign exchange earning services.
✓ Bonds and Guarantees: Bonds/guarantees issued. Unfair callingof bond insurance cover is available.
TURK EXIMExport Credit Bank of Turkey
TURKEY
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UK Export Finance is the UK’s export credit agency. As agovernment department that operates under an act of parliament,it complements the private market by providing governmentassistance to exporters and investors, principally in the form ofinsurance policies and guarantees on bank loans.
General informationExport Credits Guarantee Department1 Horse Guards RoadLondonSW1A 2HQ+44 (0)20 7271 8010+44 20 7512 7691www.gov.uk/[email protected]
HistoryFounded: 1919Ownership: UK government
Senior managementLouis Taylor, Chief [email protected]
Contact person(s)Gareth Waterhouse, International and Strategy [email protected]
Simon Foister, Senior International Policy [email protected]
Major facilities✓ Buyer credit facility✓ Supplier credit financing facility✓ Lines of credit✓ Project financing✓ Export insurance policy✓ Bond insurance policy✓ Overseas investment insurance✓ Letter of credit guarantee scheme✓ Bond support scheme✓ Export working capital scheme✓ Direct lending facility✓ Export refinancing facility✓ Foreign exchange credit support scheme
UKEFUK Export Finance
UNITED KINGDOM
The official ECA of the United States supports US jobs by financingthe export of US goods and services. The bank does not competewith the private sector but assumes commercial and political risksthat the private sector is unable or unwilling to accept. US Ex-ImBank also helps to level the playing field for US exporters byproviding export credits that are comparable to financing offeredby foreign governments. Historically, 80% or more of US Ex-ImBank’s authorisations have been for small businesses.
General informationExport-Import Bank of the United States811 Vermont Avenue, NWWashingtonDC 20571+1 202 565 3946/800-565-3946+1 202 565 [email protected]
HistoryFounded: 1934Ownership: 100% federal government-owned independent agency
Senior managementFred Hochberg, President and [email protected]
Jim Cruse, Senior Vice President – Policy and [email protected]
Contact person(s)Isabel Galdiz, Vice President, International [email protected]
Jim Cruse, Senior Vice President – Policy and [email protected]
Major facilities✓ Export credit insurance: Policies protect against political and
commercial risks of nonpayment. Single and multi-buyer short-term policies (90-100% cover) and single-buyer medium-termpolicies are available (100% cover).
✓ Export finance: Provides fixed-rate loans to private and publicsector creditworthy international buyers of US goods andservices.
✓ Export loan guarantees: Provides medium and long-term loanguarantees that cover 100% of principal and interest of acommercial loan against political and commercial risks of non-payment.
✓ Export working capital loan guarantees: Provides exporterswith the liquidity to produce US goods and services intendedfor export, helping them compete more effectivelyinternationally.
✓ Project finance: Offers project finance for projects that rely onproject revenues for repayment. Project finance offersmaximum flexibility for project sponsors and helps USexporters compete globally.
US EXIMBANKExport-Import Bank of the United States
USA
Zurich Credit & Political Risk is a global political risk and creditinsurance business based in Washington DC, with offices in NewYork, Miami, Toronto, Houston, London, Singapore, Beijing, HongKong, Tokyo, Sydney, Paris, Barcelona, Frankfurt, and Zurich. Zurichcollaborates with a wide range of organisations, including exportcredit agencies, international banks and private insurers, tostructure deals in all business sectors. To date, Zurich has writtenpolicies covering risks in more than 150 countries.
General informationZurich1201 F Street, NWSuite 950WashingtonDC 20004+1 202 585 3100+1 202 628 2216www.zurichna.com/en/prodsols/[email protected]
HistoryFounded: 1997Ownership: Zurich Financial Services Group
Senior managementJim Thomas, Executive Vice President and Managing Director [email protected] 202-585-3123
Contact person(s)Jim Thomas, Executive Vice President and Managing Director [email protected] 202-585-3123
Edward Moeller, Senior Vice President and Credit Team Lead [email protected] 202-585-3125
Major facilities✓ Political Risk Insurance: Coverage against: expropriation;
political violence; currency inconvertibility; non-honouring ofsovereign and sub-sovereign debt obligations; arbitrationaward default; wrongful calling; non-repossession; and otherperils customised to fit transaction requirements. Policy termsup to 15 years; capacity up to $150 million per transaction;indemnities from 90-100%.
✓ Credit Insurance: Cover offered: comprehensive paymentdefault, whether occurring due to political risk events orcommercial reasons. Policy terms up to seven years; capacityup to $75 million per transaction. Zurich’s Excess of Loss CreditInsurance product covers payment default related to short-term receivables.
ZURICH Zurich Credit and Political Risk
USA
We're risk specialists. Our knowledge and strength help unleash theworld's capacity to advance. At XL Catlin, we know the world needsrisk to move forward. As the need to innovate drives you and yourbusiness, your risks grow ever more complex.
Risk is our business. Our brand expresses how we think about risk,and our unique approach to it. Our brand also reflects our history –with an eye on the future. We look at risk in new ways. We’re opento new ideas; ready to provide innovative, creative solutions to therisks of your changing world. To work with you and help youunleash your capacity to advance.
It’s why at XL Catlin we say: ‘Make Your World Go’.
General informationXL Insurance Company SE70 Gracechurch StreetLondonxlgroup.com/insurance
HistoryThe U.S. liability insurance crisis of the 1980s: capacity halved,premiums doubled. Then they doubled again. Nobody wasprepared to cover the risks, so nobody was prepared to take them.In 1986, 68 of the world's largest companies came together andfounded what became XL Group plc to solve complex risks. Wemanaged to unstick what was stuck. We found an answer to theproblem. We changed the rules.
Senior managementJeffrey AbramsonGlobal Head Trade [email protected]
Joe BlenkinsoppGlobal Head Political Risk & Trade Credit [email protected]
Rafael Docavo-MalvezziGlobal Head of Risk Management PRTC [email protected]
Major facilities✓ Political unrest and credit risk headlines are in the news every
day, adding to businesses’ global risk management concerns.XL Catlin’s highly experienced underwriting and analyticalteam helps businesses manage the complex and ever-changing risks of a global marketplace, designing special riskmitigation solutions. Coverage can be arranged for PoliticalRisk Investment Insurance, Contract Frustration, Trade Creditand Trade Receivables Insurance with up to $200 millioncapacity available per policy.
XL CatlinXL Insurance Company SE
UNITED KINGDOM
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AOFI was established by the government of the Republic of Serbiaas a joint stock company in 2005. AOFI’s main objective isstimulating and promotion of exports, development of economicrelations of the Republic of Serbia with foreign business entitiesand the reduction of risks resulting from the disposal of productsand services abroad.
General informationSerbian Export Credit and Insurance Agency5, Ljuba Stojanovića25, SavskaUžice31000+381 11 22 05 770+ 381 11 311 80 [email protected]
HistoryFounded: 2005Ownership: state ownership – 100 %
Senior managementDanilo Ćirković, Executive director for Insurance and member ofthe Executive [email protected]
Dejan Vukotić, CEO and President of the Executive [email protected]
Nikola Tegeltija, Executive director for Finance and member ofExecutive [email protected]
Contact person(s)Biljana Stankovic, Associate in Sector for [email protected]+381116558263
Nina Jeremic, Head of Underwriting, Medium and Long-termExport Credit [email protected]+381116558269
Major facilities✓ Export credit insurance✓ Loans and guarantees✓ Factoring
AOFISerbian Export Credit and Insurance Agency
SERBIA
BAEZ was established as a joint stock company and now the soleshareholder, with 100% capital share, is the Republic of Bulgaria,represented by the Minister of Economy, energy and Tourism. BAEZperforms activity on its own account and on the account of thestate. The mission of BAEZ is to protect Bulgarian exporters fromfinancial losses and to support the realisation of their productionon international markets by export insurance mechanisms. BAEZhas also developed schemes that facilitate access of the companiesto credits and financing.
General informationBulgarian Export Insurance Agency55, Alexander Stamboliiski BlvdSofia1301+359 2 923 69 11 /+359 2 923 69 17+359 2 987 06 [email protected]
HistoryFounded: 1998Ownership: Full state ownership
Contact person(s)Marketing [email protected]
Major facilities✓ Export credit insurance: Insurance against short-term
commercial risk (marketable and non-marketable); insuranceagainst short-term political risk; domestic credit insurance.
✓ Export financing: Pre and post-shipment financing. Investmentinsurance; insurance of letters of credit; insurance of bankguarantees.
✓ Insurance of credit and financing: Covering the risk of delayedpayment on behalf of the debtor or insolvency/over-indebtedness or bankruptcy of the debtor.
BAEZBulgarian Export Insurance Agency
BULGARIA
Members of the Prague Club
BECI has since its inception in 1996, continued to affirm its positionin the market by growing its product base from offering only exportcredit insurance, to later introducing domestic credit insurance,construction related guarantees, invoice discounting and debtcollection. The political risks are reinsured by the Government ofBotswana whilst commercial risks are reinsured in the privatereinsurance market. BECI continues to explore new businessopportunities.
General informationExport Credit Insurance & Guarantee Company (Botswana) (Pty) LtdPrivate Bag BO 279Gaborone00 267 318801500 267 [email protected]
HistoryFounded: 1996Ownership: Botswana Development Corporation Limited
Senior managementBonani Dube, Marketing [email protected]+267 3188015
Cowell Habana, General [email protected]+267 3188015
Harold Kuvenga, Finance [email protected]+267 3188015
Rocky Ramalefo, Underwriting [email protected]+267 3188015
Contact person(s)Cowell Habana, General [email protected]+267 3188015
Major facilities✓ Export and domestic credit insurance✓ Construction-related guarantees✓ Invoice discounting✓ Debt collection
BECIExport Credit Insurance & Guarantee Company(Botswana) (Pty) Ltd
BOTSWANA
Rated AA by Standard & Poor’s, DHAMAN is a multilateral creditand political risk insurer owned by 21 Arab countries. It has beenplaying since 1974 a significant role in promoting Arab domesticand foreign trade as well as investment flows into Arab countries.DHAMAN has built a large and solid network of partnersworldwide, including credit insurers, reinsurers and brokers.
General informationThe Arab Investment & Export Credit Guarantee CorporationPO Box 23568Safat13096+965 24 959 555+965 24 959 596/[email protected]
HistoryFounded: 1974Ownership: All Arab countries
Senior managementFahad R. Al Ibrahim, Director [email protected], + 965 24959555
Mohamed F. Chatti, Director, Operations [email protected], +965 24959548
Contact person(s)Azza Huneidi, Assistant Director, Financial [email protected], + 965 24959508
Mazen Tina, Head, Investment [email protected], + 965 24959539
Mohamed F. Chatti, Director, Operations [email protected], +965 24959548
Slim Al Lehyani, Head, [email protected], + 965 24959515
Yasser Ragab, Assistant Director, Export Credit [email protected], + 965 24959511
Major facilities✓ Investment insurance: DHAMAN protects Arab and non-Arab
investors investing in Arab countries against losses arisingfrom political risks: expropriation and nationalisation, currencyinconvertibility and transfer restrictions, war and civildisturbances and breach of contract. Both new and existinginvestments are eligible.
✓ Trade credit insurance: Dhaman provides cover against politicaland commercial risks (bankruptcy and protracted default) for:– Arab countries’ domestic trade,– Arab exports worldwide,– Arab countries’ imports of capital goods and strategic
commodities of non-Arab countries✓ Financial institutions: Dhaman provides financial institutions
with adequate insurance contracts which include:– The Documentary Credit Insurance Policy (DCIP) which
protects the confirming bank against the default of theissuing bank.
– The Leasing Insurance Policy (LIP) which protects the lessoragainst the default of the Lessee.
– The Facturing Insurance Policy (FIP) which protects thefactor against the default of the obligors.
DHAMANThe Arab Investment & Export CreditGuarantee Corporation
MULTILATERAL
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Export Credit Guarantee Agency of Oman SAOC (ECGA O) wasestablished in 1991 as a national export credit agency of Oman, withthe primary goal of promoting Oman non-oil exports. ECGA Oplays an instrumental role by extending its services towardsenhancing export activities of Omani non-oil goods and thuscontributing to the national economy.
General informationExport Credit Guarantee Agency of Oman SAOCPO 2031MuscatPC 111+968 24813979+968 [email protected]
HistoryFounded: 1991Ownership: Fully owned by the Goverment of Oman
Senior managementNasir Al-IsmailyGM [email protected] +968 24346650
Ahmed Al-Abdali, Head of Admin [email protected] +968 24346633
Imaad Al-Harthy, Head of Claims & Recovery [email protected] +968 24346622
Contact person(s)Nasir Al-IsmailyGM [email protected] +968 24346650
Ahmed Al-Abdali, Head of [email protected] +968 24346633
Major facilities✓ Export credit insurance: Provides short-term cover against
commercial and political risks.✓ Domestic credit insurance: Provides short-term cover against
commercial risks.✓ Pre-shipment credit guarantee: Issues pre-shipment credit
guarantee to enable the exporters to obtain working capitalcredit facilities from commercial banks.
✓ Post-shipment credit facilities: Assists exporters to avail post-shipment credit facilities through commercial banks.
✓ Gurantees on Conformation of latter of credit (DCLC)
ECGA OExport Credit Guarantee Agency of Oman SAOC
OMAN
ECGE is the government export credit agency offering its clientsglobal credit solutions including credit insurance, factoring,information reports and debt recovery.
General informationExport Credit Guarantee Company of Egypt5 El Nast Road, Nasr City, 4th FloorCairo+202 2263 6740/ 6745 / 6762+202 2263 [email protected]
HistoryFounded: 1993Ownership: Export Development Bank of Egypt 70%, NationalInvestment Bank 21%
Senior managementOla GadallahChairman and Managing Director [email protected]
Contact person(s)Alaa GoudaGeneral Manager [email protected]
Major facilities✓ Export and domestic credit insurance✓ Whole turnover policy✓ Single shipment policy✓ Unconfirmed letters of credit policy✓ Services policy✓ Export, import and domestic factoring✓ Insurance, finance and collection of export and domestic trade
receivables on recourse and non-recourse basis
ECGE EExport Credit Guarantee Company of Egypt
EGYPT
The Export Credit Insurance Company of the Emirates (ECIE) is anexport credit agency that was established as part of H.H. SheikhMohammed Bin Rashid Al Maktoum’s vision, in his capacity as Vice-President and Prime Minister of the UAE, and Ruler of Dubai; to helpUAE-based companies make use of opportunities to grow theirexports safely, and facilitate sustainable economic development andprosperity. ECIE’s trade credit insurance policies cover a UAE-basedseller against the risk of non-payment by its customers. ECIE’sbusiness activities are governed by the UAE Insurance Authority,and its relations with companies and banks are conducted on acommercial basis. ECIE is a member of the Berne Union PragueClub, the Organisation of the Credit Alliance and the Aman Union –an association of Arab and Islamic trade credit insurers.
General informationExport Credit Insurance Company of the EmiratesClock Tower Square, Business Village, Block A, 3th Floor P.O. Box 121616Dubai+971 4 4455333+971 4 [email protected]
HistoryFounded: 2008Ownership: 100% Government of Dubai
Senior managementEng. Saed Al AwadiManaging Director & CEO
Ms. Mariam Al AfridiDirector
Contact person(s)Mr Mohammad Feras Al HamwiSales Manager
Major facilities✓ Conventional and shariah-compliant export trade credit
policies✓ Short-term marketable and non marketable credit risk cover✓ Medium to long-term credit risk cover✓ Excess of loss cover✓ Foreign investment insurance cover✓ Specific transaction cover in case of locally produced/value-
added goods✓ Credit risk cover for banks and financial institutions✓ Debt collections & recoveries, corporate credit quality labels &
ratings
ECIEExport Credit Insurance Company of the Emirates
UNITED ARAB EMIRATES
ECIO was established in 1988 by Law 1796/1988 and it is anautonomous “Public Entity in Private Law”. It is governed by a nine-member Board of Directors which is appointed by the supervisingMinister of “Development, Competitiveness, Infrastructure,Transportation and Networks”. Its Reserve Capital amounts to €140 million.
General informationExport Credit Insurance Organisation57, Panepistimiou StreetAthens105 64+30 210 331 0017+30 210 331 [email protected]
HistoryFounded: 1988Ownership: 100% State Ownership
Senior managementAggelos Kotsiopoulos, General [email protected]+302119966204
Themis Kalpaktsoglou, [email protected]+302119966207
Contact person(s)Aris Krevvatas, Head of Insurance & Customer Support [email protected]+302119966205
Katerina Idreou, Head of Short Term Underwriting & CreditInformation [email protected]+302119966216
Katerina Mansouri, Head of MLT & Special [email protected]+302119966219
Katia Sarantaki, Head of Claims and Recoveries [email protected]+302119966265
Lydia Mouratidou, Head of Insurance & Customer Support Dpt.Thessaloniki [email protected]+302310548718
Major facilities✓ Insurance for ST Export Credits against commercial and
political risks✓ Insurance for MLT Export Credits against commercial and
political risks✓ Investment Insurance for Greek investments undertaken
abroad, against political risks
ECIOExport Credit Insurance Organisation
GREECE
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EGFI, established in 1973, is the Iranian state-owned export credit insurance company affiliated to I.R. of Iran’s Ministry of Industry, Mine & Trade whose responsibility is to help export promotion through providing Iranian exporters with:
- Overseas insurance policies to cover the major political &commercial risks involved in their export operations;
- Credit guarantees to help them meet their financial requirements.
General informationExport Guarantee Fund of Iran (EGFI)No. 5, 16th St., Bucharest Ave., Argentina Sq., Tehran, 1514837114, IranTel: +98 21 88739267 & +98 21 88733370Fax: +98 21 88733376 www.egfi.org / [email protected]
HistoryFounded: 1973/1994Ownership: Wholly state-owned
Senior managementSeyed Kamal Seyed Ali, Chairman & CEOArash Shahraini, Board Member Mojtaba Kavousi, Board Member
Contact person(s)Arash Shahraini, Board Member & Deputy CEO [email protected]@egfi.ir+98 21 88738633-4Katayoon Valizadeh, Country Risk & International Cooperation Manager [email protected]@egfi.ir+98 21 88739267
Major facilities1. Policies:✓ Whole turnover policy✓ Technical & engineering services policy✓ Specific policy✓ Investment policy✓ Export contract frustration policy✓ Discounting of export bills insurance policy✓ Sight LCs insurance policy
EGFIExport Guarantee Fund of Iran
IRAN
EIAA is 100% state-owned export credit agency of Armenia. EIAAmission is to promote Armenian export. The Board of Directorsconsists of senior executives of the Armenian government
General informationExport Insurance Agency of Armenia26/1 V. Sargsyan str., Erebuni PlazaOffice [email protected]
HistoryFounded at the end of 2013, started full operations in 2015. Focusedon short term supplier's credit.
Senior managementArmen KhachatryanChief legal [email protected]
Vazgen AbgaryanActing Executive [email protected](+374 10) 58 29 29
Contact person(s)Tatevik MuradyanAdvisor to the Management [email protected]
Vazgen AbgaryanActing Executive [email protected](+374 10) 58 29 29
EIAAExport Insurance Agency of Armenia
ARMENIA
2. Guarantees:✓ Manufacturer’s credit guarantee✓ Local currency credit guarantee✓ Foreign exchange credit guarantee✓ Buyer’s credit guarantee✓ Cover for bank’s bonds (domestic)
3. Bonds & cover for bank’s bonds
Banca de Export Import a României EximBank S.A. has been established in 1992 as a joint stock company with the Romanian state as major shareholder.EximBank has been entrusted with the public mandate to support Romanian exporters, as well as projects in the areas important for the long-term sustainable development of the Romanian economy, such as: infrastructure, public utilities, regional development, research & development, employment & training of personnel, or environmental protection. EximBank has also a strategic focus on Romanian SME support.In August 2010 Compania de Asigurari-Reasigurari Exim Romania S.A., a joint stock company with EximBank Romania as major shareholder, was set up for short-term export credit insurance against marketable risk. EximBank Romania cooperates with a wide range of export credit agencies, local and international banks and related organisations to strengthen the operating potential and competitiveness of Romanian companies on domestic and international markets.
General information6A, Barbu Delavrancea St., Bucharest 1+40 21 405 30 [email protected]
HistoryOwnership: 95.374% – the Romanian state 4.626% – five regional investment funds
Senior managementTraian Halalai, Executive PresidentCrina Cosma, Executive Vice-PresidentPaul Ichim, Executive Vice-President
Contact person(s)Corina VulpesDirector, Head of International Financial Relations Department
Major facilities✓ Financing of strategic economic sectors✓ Bonds and guarantees✓ Export credit insurance
– Short-term pre-shipment and credit cover against non-marketable risks
– Medium and long-term export credit insurance (supplier and buyercredits) against commercial and political risks
✓ Insurance of Romanian capital investments abroad
EXIM REximbank of Romania
ROMANIA
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EXIAR is the national export credit agency of Russia. EXIARmandate is to support Russian export and investment abroad.EXIAR covers short, medium and long-term risks. The chartercapital makes up RUB31 billion. The Board of Directors consists ofsenior executives of the Russian government and independentdirectors. The Agency’s activities are backed by the RussianFederation in line with the budget legislation.
General informationExport Insurance Agency of Russia3, 1st Zachatievsky Lane, Bldg. 1Moscow119034+ 7 495 783 1188+7 495 783 [email protected]
HistoryFounded: 2011Ownership: Sole shareholder – Vnesheconombank (VEB), 100%State-owned
Senior managementAlexey TyupanovCEO, Chairman of the Management [email protected]+7 495 783-11-88
Hanieh FerdowsiManaging Director, International Business [email protected]+7 495 783-11-88
Contact person(s)Arthur LyaschenkoDirector, External [email protected]+7 495 783 11 88 (ext.1210)
Ekaterina KarasinaManaging Director, External [email protected]+7 495 783-11-88
Major facilities✓ Export credit insurance✓ Investment insurance
EXIARExport Insurance Agency of Russia
RUSSIA
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Croatian Bank for Reconstruction and Development (HBOR) is thenational development and export bank, and export credit insurerwith a task of supporting sustainable economic growth pursuantto the overall strategic goals of the Republic of Croatia.
Via different financing programmes, HBOR supports SMEs,infrastructure projects, tourism, industry, agriculture, environmentalprotection, energy efficiency and renewable energy resources aswell as export. HBOR also gives loans for incentives to SME start-ups and loans to improve liquidity, loans for innovations and newtechnology projects.
HBOR provides insurance and reinsurance of export against non-marketable risks. By establishing the Croatian Credit Insurance JSC(HKO) for commercial credit insurance, HBOR Group wasincorporated.
HBOR is a member of different associations, clubs and otherinstitutions that share a similar background and similar interestscommitted to global development. The bank also co-operates withthe export credit agencies, international banks and supranationalinstitutions to meet the needs of Croatian entrepreneurs.
General informationCroatian Bank for Reconstruction and DevelopmentStrossmayerov trg 9Zagreb10000+385 1 4591 539/ +385 1 4591 546+385 1 4591 547/ +385 1 4591 [email protected]
HistoryFounded: 1992Ownership: 100% State-owned
Senior managementDusan Tomasevic, President of the [email protected]+385 1 45 91 706
Goran Filipic, Member of the Managing [email protected]+385 1 45 91 522
Martina Jus, Member of the Managing [email protected]+385 1 45 91 522
Contact person(s)Andrea Mergedus, Managing [email protected]+385 1 45 91 545
Major facilities✓ Financing of the economy✓ Export finance: pre- and post-shipment export finance,
supplier/buyer credit, credit lines✓ Export credit insurance: pre-export financing insurance, pre-
shipment insurance, guarantee insurance, ST insurance &reinsurance, MLT insurance (supplier & buyer credit insurance)
✓ Guarantees
HBORCroatian Bank for Reconstruction andDevelopment
CROATIA
Eximgarant of Belarus is the official export credit agency of the Republic of Belarus vested with the exclusive right of conducting Export credit insurance with State support. The strategic goal of the company is the development and improvement of export potential of the Republic of Belarus. Along with principal activities Eximgarant of Belarus contributes to the attraction of foreign direct investments in the Republic of Belarus. Eximgarant of Belarus carries out classical types of insurance and has the license for reinsurance. This enables to cover the whole range of risks associated with the implementation of any investment project in Belarus.
General information2, Melnikaite streetMinsk 220004Republic of BelarusTel: (+375 17) 209 40 28 Fax: (+375 17) 209 40 67www.eximgarant.byE-mail: [email protected]
HistoryFounded: 2001Ownership: 100% government-owned
Senior managementGennady Mitskevich, Director General Mikhail Olshansky, First Deputy Director General Igor Lyskovets, Deputy Director General Oleg Aniskevich, Deputy Director General Oleg Pavlovskiy, Deputy Director General
Contact person(s)Polina Maslova, Head of International Business Development [email protected]+37517 203 14 11Elizaveta Kharkovets, International Business Development [email protected]+37517 203 14 11
1. 1. Export credit insurance (ST, MLT):✓ Insurance of Export Contracts against Politicaland/or Commercial Risks✓ Buyer Credit Insurance✓ Investment Insurance✓ Pre-Export Risk Insurance✓ International Lease Insurance✓ Pre-Export Financing Insurance✓ Investment Financing Insurance✓ Bank guarantees and L/C Insurance✓ Export Factoring Insurance
EXIMGARANTEximgarant of Belarus
BELARUS
1. 2. Domestic credit insurance (available for foreign banks and companies cooperating with Belorussian entities):✓ Insurance of Contracts against Commercial Risks✓ Insurance against Risk of Non-redemption of a Loan
1. 3. Classic insurance (available for foreign companies implementing investment projects in Belarus):✓ Insurance against construction and assembly risks✓ Insurance of legal entities' property against fire and other dangers ✓ Cargo insurance ✓ Insurance against employees medical expenses✓ Other types
1. 4. Reinsurance
Major facilities
The Jordan Loan Guarantee Corporation (JLGC) was establishedas a public shareholding company in accordance with theJordanian Companies’ Law and registered in the registry of thepublic shareholding companies under number 242 on March 26,1994. Its establishment was formally declared in the FoundersAssembly meeting held on April 17, 1994. The corporation was givenpermission to start operating as of May 7, 1994.
The establishment of JLGC came in response to the decisionundertaken by the Cabinet session of 24/8/1993, which approvedthe establishment of a public shareholding company forguaranteeing loans to small and medium-sized organisations.
In 1997, JLGC took on the functions of the Export Credit GuaranteeDepartment and the Counselling Services Unit. JLGC’s capital wassubsequently increased to JD10mn (US$1mn).
General informationJordan Loan Guarantee Corporation24 Prince Shaker Bin Zaid Street, Al Shmeisani P.O.Box 830703Amman1118300962 6 5625400-0600962 6 5625408/[email protected]
HistoryFounded: 1994Ownership: Limited public shareholding company
Senior managementDr. Mohamed Al Jafari, Director General [email protected]
Mohannad Rashdan, Assistance Director General for Technical &Operational Group
Zaid Al Kayed, Head of the Export Credit Department [email protected]
Contact person(s)Dr. Mohamed Al Jafari, Director [email protected]
Zaid Al Kayed, Head of the Export Credit [email protected]
Major facilities✓ Loan guarantees✓ Export credit guarantees
JLGCJordan Loan Guarantee Corporation
JORDAN
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IGA is the ECA of Bosnia and Herzegovina, established inSeptember 1996 by the decree of the government of Bosnia andHerzegovina. The start-up activity was non-commercial riskinsurance of foreign enterprises and financial institutions havingtrade exposure in Bosnia and Herzegovina. In 1999, IGA expandedits activities, assuming the role of the state ECA.
General informationExport Credit Agency Bosnia & HerzegovinaHamdije Cemerlica 2/ISarajevo71000+387 33 720 140 or +387 33 720 151+387 33 720 [email protected]
HistoryFounded: 1996Ownership: Full state ownership
Senior managementLamija Kozaric-Rahman, General [email protected] 33 720 140
Ljiljana Bevanda, Deputy General [email protected]
Mirko Dejanovic, Deputy General [email protected]
Contact person(s)Aldijana Dubravic, Credit Insurance [email protected] 33 720 144
Lamija Kozaric-Rahman, General [email protected] 33 720 140
Major facilities✓ ST and MT financing for domestic export companies✓ Working capital loan guarantees, to local banks providing
financing to export companies✓ Performance, bid and advance payment bonds facility for
domestic companies performing works abroad✓ Factoring facility for domestic exporting companies✓ Export credit insurance✓ Domestic credit insurance✓ Import credit reinsurance facility for foreign ECAs and
insurance companies✓ Credit information facility on domestic companies✓ Political risk insurance for foreign traders with domestic
companies and sovereign
IGAExport Credit Agency Bosnia & Herzegovina
BOSNIA AND HERZEGOVINA
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KredEx Credit Insurance Ltd is a self-sustaining insurance companyin the jurisdiction of Estonian State, whose goal is to support thedevelopment of Estonian exports. The company provides variousinsurance solutions, which serve to manage the export risks ofenterprises KredEx Credit Insurance Ltd acts on the principles andself-sustaining diversified portfolio.
General informationKredEx Credit Insurance LtdHobujaama 4Tallinn10151+372 667 4100+372 667 [email protected]
HistoryFounded: 2009Ownership: Ministry of Economic Affairs & Communications 2/3;Credit and Export Guarantee Fund KredEx 1/3
Senior managementMeelis TamblaHead of the [email protected]+372 667 4138
Contact person(s)Mariko RukholmMember of the [email protected]+372 6674 139
Major facilities✓ ST credit insurance✓ MLT credit insurance✓ Pre-shipment insurance✓ Investment insurance
KREDEXKredEx Credit Insurance Ltd
ESTONIA
Export Credit Insurance Corporation (KazExportGarant) performsits activities as an export credit agency of the Republic ofKazakhstan in order to stimulate non-oil export and investmentsabroad by providing insurance against commercial and politicalrisks. Since 2010 KazExportGarant provides post-export tradefinancing for exporters in non-oil sector. Insurance financialstrength rating assigned by Moody’s Investors Service is Baa2,outlook – “Stable”.
General informationKazExportGarant Export Credit Insurance Corporation80 Zenkov StrAlmaty050010+7 727 250 00 21+7 727 293 88 [email protected]
HistoryFounded: 2003Ownership: Joint stock company, 100 % government-owned
Senior managementYerken SadykovChairman of the [email protected]
Contact person(s)Ruslan BekturganovSenior Manager of Marketing and PR [email protected]
Major facilities✓ Export credit insurance: pre-shipment risks, supplier credit
insurance, buyer credit insurance. LC insurance, investmentinsurance. Reinsurance, bank guarantee insurance. Exporttrade finance: post-shipment export finance through partnerbanks
KAZEXPORTGARANTKazExportGarant Export Credit InsuranceCorporation
KAZAKHSTAN
SIA Latvijas Garantiju aģentūra [Latvian Guarantee Agency Ltd](LGA) is a Limited Liability company, which provides support toLatvian businesses for implementing business ideas. LGA helpsentrepreneurs to attract new finance by establishing risk capitalfunds that provide seed, start-up and expansion capital as well asdirectly issuing credit and export guarantees, and providingmezzanine loans.
General informationLatvian Guarantee AgencyZigfrida Annas Meierovica bulvaris 14RigaLV-1050+371 6721 6081+371 6735 [email protected]
HistoryFounded: 1998Ownership: LGA is 100% state-owned Limited liability company; theholder of state shares is the Ministry of Economics
Senior managementKlavs Vasks, Chairman of the board
Andris Gadmanis, Member of the board
Inese Matvejeva, Member of the board
Ivars Golsts, Director
Contact person(s)Ivars GolstsDirector [email protected] +371 6735 9373
LGALatvian Guarantee Agency
LATVIA
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The Lebanese Credit Insurer s.a.l. (LCI) is the first independentspecialised credit insurance company in Lebanon and the MiddleEast. LCI is active through its partners in Saudi Arabia, UAE, Kuwait,Qatar, Jordan, Egypt, Bahrain, Oman, Syria, Nigeria, Serbia, Cyprusand Croatia.
General informationThe Lebanese Credit InsurerSodeco Square, Block B, 15th FloorBeirut+961 1 615 616+961 1 611 [email protected]
HistoryFounded: 2001Ownership: Atradius Participations Holding B.V (49%), RegionalInsurance Companies (21%) and Private Investors (30%)
Senior managementKarim NasrallahGeneral [email protected]
Naser Abu GhazalehHead of Business [email protected]
Contact person(s)Diana LoutfyCorporate Communications Deputy [email protected]
Major facilities✓ LCI focuses on domestic and export trade credit insurance
(trade receivables insurance). Policies cover manufacturers,trading companies and providers of services, against the risk ofnon-payment of their local and foreign customers. Tradereceivables management tools are also offered such as CreditInformation, Debt Collection, and Risk Management Solutionsthrough its 100% owned subsidiary LCI Services s.a.l.
LCIThe Lebanese Credit Insurer
LEBANON
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Indonesia Eximbank is a special financial institution establishedunder the Law the Republic of Indonesia No. 2 Year 2009.
To be able to perform and to function effectively, IndonesiaEximbank operates independently based on a separate law (lexspecialis) and with a status of a sovereign entity. As an extensionof the Government of Indonesia, Indonesia Eximbank is expectedto help provide funding in markets not served by commercial banksor financial institutions (fill the market gap) or due to lack ofcapacity in competitive financing and ability in absorbing risks, inorder to support the national export development programmethrough National Export Financing (PEN).
General informationIndonesia Eximbank Gedung Bursa Efek Indonesia Menara IILantai 8Sudirman CBD Jl. Jend. SudirmanKav. 52-53JakartaIndonesiawww.indonesiaeximbank.go.idcorpsec@indonesiaeximbank.go.id
Senior managementNgalim Sawega, Chief Executive Officer [email protected] +62215154638
Dwi Wahyudi, Managing Director I [email protected] +62215154638
Isnen Sutopo, Managing Director II [email protected] +62215154638
Basuki Setyadjid, Managing Director III [email protected] +62215154638
Arif Setiawan, Managing Director IV [email protected] +62215154638
Omar Baginda Pane, Managing Director V [email protected] +62215154638
Contact person(s)Dessy Suryana PutraDepartment Head of Guarantee and Insurance Division [email protected] +62215154638
M. Syafruddin Division Head of Guarantee and Insurance [email protected] +62215154638
Major facilities✓ SMEs Financing✓ Guarantee✓ Sharia✓ Insurance✓ Consulting Services
LPEIIndonesia Eximbank
INDONESIA
Macedonian Bank for Development Promotion via commercialbanks provides financial support for start-ups and developingSMEs. The lending programme consists of a variety of ST and MLTcredit lines offering favourable credit terms and technicalassistance tailored according to the entrepreneurs’ specific needs.The bank performs the role of an official export credit agency ofthe Republic of Macedonia providing export support for companiesthrough pre-shipment finance loans and export credit insurance.
General informationMacedonian Bank for Development Promotion26, Veljko Vlahovik str, PO Box 379Skopje1000+ 389 2 3115 844+ 389 2 3239 [email protected]
HistoryFounded: November 1998Ownership: A shareholding company: 100% government-owned
Senior managementDragan Martinovski,Chief Executive Officer [email protected]
Qenan IdriziChief Operative Officer
Contact person(s)Darko StefanovskiManager of Credit Export [email protected]
Jasmina Kolekeska, Senior underwriter
Major facilities✓ Investment loans✓ ST export credit insurance,✓ Pre-shipment finance loans✓ Factoring
MBDPMacedonian Bank for Development Promotion
MACEDONIA
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The agency was founded under special ordinance in August 2005,passed by the transitional National Assembly. The headquarters isin Khartoum and can establish branches in any Sudanese state orabroad. The agency maintains separate accounts for policyholders’funds and shareholders’ funds.
The main objectives of the agency:– To encourage and develop Sudanese exports– Support the export sector
To achieve those objectives, the agency practises the followingactivities:
– Insurance and reinsurance of Sudan’s exports proceeds– To compensate insured exporters against risks as stipulated
on different policies– To provide finance and guarantees that enhances the
competitive position and increase the volume of exportsand their proceeds.
– To participate in promotion of financing for Sudan’s exportsin international markets
– Conduct marketing researches and studies– Provide and extend credit to exporters
General informationNational Agency for Insurance and Finance of Export – SudanMustafa Abu Ella Street, Saving & Social Development Bank Tower,6th FloorKhartoum+24 9183 747 107+24 9183 747 [email protected]
HistoryFounded: May 15, 2005Ownership: Ministry of Finance & National Economy, Central bankof Sudan, Commercial banks and Insurance companies
Senior managementMustafa Yousef Holi, General Manager
Elhadi A.M. Saeed, Manager Export Insurance Department
A/Moniem A/Elateef Saad, Promotion and Planning Manager
Hamid Elrasheed Ahmed, Finance and Investment and FinancialManager
Major facilities✓ Export Credit Insurance✓ Credit Faculties✓ Promotion and Planning Activities✓ Co-coordinator for Export Activities, with Various Concerned
Unit
NAIFENational Agency for Insurance and Finance ofExport (NAIFE)-Sudan
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Berne Union 2015
The NZECO operates as a business unit within the New ZealandTreasury. Its mission is to help New Zealand exporters manage riskand capitalise on trade opportunities around the globe byproviding guarantee and insurance solutions that complementthose in the private sector. The Secretary to the Treasury has beendelegated the power from the Minister of Finance to provide theseguarantee and insurance products pursuant to the Public FinanceAct 1989.
General informationThe New Zealand Export Credit Office1 The Terrace, PO Box 3724level 5Wellington6140Tel: +64 4 917 6060 Fax: +64 4 473 0982www.nzeco.govt.nz [email protected]
HistoryFounded: 2001Ownership: Wholly owned and guaranteed by the New ZealandGovernment
Senior managementChris Chapman, [email protected] 4 917 6004
Kim Tate, Head of [email protected] 4 917 6018
Peter Rowe, Head of Business [email protected] 4 917 6080
Contact person(s)Sophie Le Corre, Team [email protected]+64 4 917 6060
Major facilities✓ Export credit insurance:
– Covers commercial and political risks on export transactions– Short-term trade credit cover (including co-insurance with
private sector) where the private sector lacks the capacityor willingness
– Medium/long-term (over one-year credit period) cover forsupplier and buyer credit facilities
– Guarantees for Letters of Credit✓ Bonds, sureties and guarantees:
– Guarantee products to support bid bonds, advancepayment bonds, performance bonds, warranty bonds andUS and Canadian surety bonds
✓ Other products:– Bill of exchange guarantee– Loan guarantee
NZECOThe New Zealand Export Credit Office
NEW ZEALAND
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The SEP was established under the auspices of the Saudi Fund forDevelopment (SFD) in 1999 to act as the national ECA of SaudiArabia, which provides different facilities to support Saudi non-crude oil goods and services, which contain 25% or above of theSaudi value-added component.
General informationSaudi Export ProgramPO Box 50483Riyadh11523+966 1 465 9399+966 1 465 [email protected]
HistoryFounded: 1974Ownership: Government of Saudi Arabia
Senior managementEng. Yousef AL-BassamVice-Chairman and Managing Director, Saudi Fund ForDevelopment
Contact person(s)Ahmed Al-GhannamDirector General of Saudi Export Program [email protected]+966 1 2794466
Sultan Al-MarshadActing Director of Credit Insurance & Guarantee [email protected]+966 1 279 4149
Major facilities✓ Credit Insurance and export guarantees:
– Whole turnover export credit insurance policies– Single transaction policies– Documentary credit insurance policies (DCIP)– Documentary credit confirmation insurance contract
(DCCIC)– Working capital guarantee cover (WCGC)
✓ Direct lending to major export transactions:– Buyer credit– Supplier credit– Lines of credit– Murabaha (profit sharing)
SEPSaudi Export Programme
SAUDI ARABIA
Société Nationale d’Assurances du Crédit et du Cautionnement 55, rue Wagane Diouf Immeuble TRIANON – 1 erétage Dakar BP: 3939 Tel:+221 33 889 82 10 Fax:+221 33 821 36 11 www.sonac.sn [email protected]
Contact person(s)Yacine Badji [email protected]
SONACSociété Nationale d’Assurances du Crédit et duCautionnement
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The only Ukrainian bank acting on behalf of the government as afinancial agent with respect to foreign loans guaranteed by Ukraine.Ukreximbank's mission is to create favourable conditions foreconomic development of Ukraine by supporting nationalmanufacturers, especially in the export-oriented sectors. Havingdiversified its operations over the last decade, Ukreximbankcurrently provides a wide range of banking services, with a strongfocus on export-import banking. Ukreximbank services aconsiderable part of foreign economic activity of Ukrainianenterprises, which represent key branches of the national economy.
Ukreximbank has the widest network of correspondents andpartners among Ukrainian banks, including over 800 commercialbanks that provide over 100 clean credit lines, 35 export creditagencies that recognise Ukreximbank as a direct borrower andguarantor, and a number of international financial institutions anddevelopment banks, such as IBRD, EBRD, EIB, KfW and others, thatpartner Ukreximbank under special programmes.
General informationJoint Stock Company The State Export-Import Bank of Ukraine127, Gorkogo StKyiv03150+380 44 247-8085+(380) 44 247-8082www.eximb.com/[email protected]
HistoryFounded: 1992Ownership: 100% state-owned
Senior managementOleksandr Hrytsenko, Chairman of the Board
Oleksandr Shchur, Member of the Board
Sergii Manokha, First Deputy Chairman of the Board
Sergii Myskiv, Deputy Chairman of the Board
Contact person(s)Oleksii Kushnir, Head of Insurance [email protected]
Olena Kozoriz, Head of Financial Institutions & Trade [email protected]
Sviatoslav Kuzmych, Head of International [email protected]
Major facilities✓ Agency services for the government of Ukraine✓ Financing of the real economy and support of SME
development: project financing, special purpose programmeswith IFIs
✓ Export-import banking: MLT structured finance, ST tradefinance, documentary credits and guarantees, FX and moneymarket, international settlements
✓ Retail and investment banking
UKREXIMBANKJoint Stock Company State Export-ImportBank of Ukraine
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Berne Union 2015
TASDEER was launched in 2011, having the following objectives:To develop, support, and globally promote exports from Qatar.To act as a public ECA offering export credit Insurance (riskcovers) and export financing solutions and services to mitigatenational exporters risks
All Qatari exporters, regardless of their size, ownership, exportcontract volume, sector or turnover are eligible for TASDEERsupport.
General informationQatar Export Development AgencyQatar Development Bank, P.O.Box 22789, Grand Hamad (Banks) StreetDoha(+974) 44 30 0000(+974) 44 31 66 [email protected]
HistoryFounded: 2011Ownership: Government of Qatar
Senior managementMansoor I. Al MahmoudCEO, Qatar Development Bank
Hassan K. Al Mansoori TASDEER Executive Director
Contact person(s)Aladdin ZardECA Manager [email protected]
Major facilities✓ Receivables financing (factoring, bill discounting)✓ Pre-shipment and contracts financing✓ Pre and post-shipment credit insurance✓ Takaful shariah-compliant credit insurance
TASDEERQatar Export Development Agency
QATAR
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Uzbekinvest was established in 1994 by the government of theRepublic of Uzbekistan as a national insurance company. In 1997Uzbekinvest was reorganised into the national export-importinsurance company. Uzbekinvest is acting as the national exportcredit agency of Uzbekistan to promote export operations byproviding export credit insurance to Uzbek exporters andcommercial banks.
UIIC (London, UK) is designed to protect the business and assetsof companies investing or doing business in Uzbekistan. Coverageis provided for investment and trade transactions against certainpolitical risks and events in Uzbekistan taken towards investors andlenders.
General informationNational Export-Import Insurance Company2, A. Kodiriy StreetTashkent100017+998 71 235 78 01, 120 03 59+998 71 235 94 [email protected]
HistoryFounded: 1994Ownership: 100% state-owned (Ministry of Finance of the Republicof Uzbekistan – 17%, National Bank for Foreign Economic Activitiesof Uzbekistan -83%)
Senior managementFakhritdin SaidakhmedovDirector General, [email protected]+998 71 2357801
Hasan MamadjonovCEO, [email protected]+44 207 954 8397
Kamil KhasanovGeneral Manager, Export Risks and Investments [email protected]+998 71 1200359
Contact person(s)Umida MusalievaManager, Export Risks and Investments Insurance [email protected]+998 71 1200359
Major facilities✓ ST export credit insurance✓ Documentary credit/guarantee insurance✓ Advance payment insurance✓ Domestic credit insurance✓ Investment insurance✓ Political risks insurance: CEN, war, contract repudiation, non-
honouring of bank LC, wrongful calling of guarantee (providedby UIIC only)
UZBEKINVESTUzbekinvest National Export-Import Insurance Company
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Value statementWe are committed to operate in a professionalmanner that is financially responsible, respectful ofthe environment and which demonstrates high ethicalvalues – all in the best interests of the long-termsuccess of our industry.
Guiding principles1. We conduct our business in a manner that
contributes to the stability and expansion ofglobal trade and investment on a sound basis,that is in accordance with applicable laws andrelevant international agreements.
2. We carefully review and manage the risks weundertake.
3. We promote export credit and investmentinsurance terms that reflect sound businesspractices.
4. We aim to generate adequate revenues tosustain long-term operations reflective of therisks we undertake.
5. We manage claims and recoveries in aprofessional manner, while at all timesrecognising the insureds’ and obligors’ rights.
6. We are sensitive about environmental issues andtake such issues into account in the conduct ofour business.
7. We support international efforts to combatcorruption and money laundering.
8. We promote best practices through exchange ofinformation on our activities, policies andprocedures, and through the development ofrelevant agreements and standards, where theseare deemed necessary to govern the provision ofexport credit and investment insurance.
9. We are committed to furthering transparencyamongst members and in the reporting of ouroverall business activities, reflective ofinternational practices and respectful of theconfidentiality of third party information.
10. We encourage cooperation and partnering withcommercial, bilateral, multilateral, and otherorganisations involved in export trade andinvestment business.
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Notes
International Union of Credit & Investment Insurers1st Floor · 27-29 Cursitor Street · London · EC4A 1LT · United Kingdom
Tel: +44 (0)20 7841 1110 · Fax: +44 (0)20 7430 0375www.berneunion.org