J Maxime Roy, Inc.

Export Credit Insurance

Extending credit to foreign customers is often required to be able to compete in foreign markets. However, this exposes exporters to the risk of non-payment. Political risks that can cause foreign customers to default include currency inconvertibility (foreign buyers' inability to obtain U.S. dollars), currency devaluation, war, revolution, cancellation of import/export licenses, foreign government action preventing the import of products, and diversion of voyage. Also, foreign companies may become insolvent or bankrupt, have cash-flow problems, or other commercial problems that could cause them to default or just take a very long time to pay. Export credit insurance (also referred to as trade credit insurance) can protect against these risks.

Benefits of Export Credit Insurance:

Export Credit Insurance can help your company:

  • Increase foreign sales
    • Foreign customers may want you to extend credit.
    • Their access to capital may be limited.
    • Interest rates in their country may be very high.
    • Strengthens relationships with foreign customers
  • Ensure You Get Paid
    • Export Credit insurance provides protection against the risk of default, allowing you to safely extend credit to foreign buyers.
  • Improve Financial Performance
    • When do you recognize income? When the sale is made or when your get paid? Accounting standards allow for income from credit-insured sales to be recognized when the sale is made.
    • Credit insurance improves financial performance, improves cash flow, reduces days sales outstanding and reserves for bad debts and improves return on assets.
  • Finance foreign sales
    • Most banks will not allow foreign accounts receivable as collateral in your borrowing base.
    • Insuring foreign accounts receivable makes them eligible to be included in the borrowing base.
    • Improve cash flow and liquidity by borrowing against insured foreign accounts receivable.

Policy Types - Policies can be arranged to cover:

  • All foreign and domestic buyers (Global Policy)
  • All foreign buyers
  • Key accounts
  • A single buyer
  • Top up (Excess of Primary)
  • Multi-insurer syndicated

Policy Terms and options:

  • No deductible
  • Deductible - either per policy year or per claim
  • Indemnity (amount covered) - 90% - !00%
  • Comprehensive or Political Risk Only Coverage
  • Premium charged on covered sales or on coverage limits
  • Premium rates are set primarily on payment terms and country of the buyer.
  • Rates are normally a fraction of 1% of covered sales.
  • Prepaid policies - where premium is charged up front based on estimated sales
  • Pay-as-you-go policies - where premium is paid on the prior month's covered sales

Trade Credit Insurers:

  • ACE
  • AIG
  • Atradius
  • Coface North America
  • EulerHermes
  • FCIA (Great American Insurance Company)
  • HCC Credit Group
  • Lloyds of London
  • Markel
  • XL Group
  • Zurich Insurance Company

Information Library

File 1

File 2

File 3

File 4

File 5

File 6