Export Credit Insurance Policy – Coverage, Benefits and Exclusions

What is an Export Credit Insurance Policy?

An Export Credit Insurance Policy is a form of Trade Credit Insurance Policy specifically focussed on the trading relationship with overseas buyers and protecting the receivables of exporters in India.

An Export Credit Insurance Policy (ECI) protects an exporter of goods and services against the risk of non-payment by an overseas buyer. This means that if an overseas buyer fails to make payment for the goods or services received, the export credit insurance company will reimburse the seller. An Export Credit Insurance Policy is a better alternative than Letter of Credit.

Export Credit Insurance in India is provided by Export Credit Guarantee Corporation of India Ltd. (ECGC) and domestic Trade Credit Insurance Companies.

What are the Risks covered by an Export Credit Insurance Policy?

Export Credit Insurance Policy Coverage includes cover for following risk exposures:

Protracted Default and Delayed Payments: If the buyer delays the payment owed to the seller beyond a specified time period, the Trade Credit Insurance Policy will reimburse the exporter for the delayed invoice payments.

Buyer Insolvency: There are cases where a buyer files for insolvency and the exporter is unable to collect the payment owed. An Export Credit Insurance Policy provides coverage for buyer insolvency as well.

Political Risk Cover: Political Risk Cover in an Export Credit Insurance Policy includes cover for risks such as political circumstances in a country make it impossible for the exporter to recover payment due. Political Circumstance include situations such as government restrictions on transferring funds, or situations such as war or rebellions which can stop payments to a foreign country.

How does Export Credit Insurance work?

The below mentioned steps present a simplified version of the workings of an Export Credit Insurance Policy:

1. The Exporter applies for a Credit Limit for an existing or a new customer to an Insurance Company. The Credit Insurance Company approves the credit limit for the customer after submitting required documents.
2. The Exporter can start selling goods on credit post receiving confirmation regarding the approval of credit limits.
3. The Exporter needs to a lodge a claim with the Credit Insurance Company whenever the invoices become overdue and the Insurance Company will reimburse the Insured upto 90% of the Invoice amount in case of a claim.

What are the benefits of an Export Credit Insurance Policy?

An Export Credit Insurance Policy offers the following benefits:

1. Better Credit Terms to Buyers: An exporter can offer better credit terms to buyers since his receivables are secured with an Export Credit Insurance Policy. This allows the exporters to gain a competitive edge over their peers.
2. Sales in New Geographies and to New Customers: An Export Credit Insurance Policy facilitates sales to new customers and also allows to expand business in new territories since exporters can make sales without worrying about the risk of unpaid invoices since the receivables are backed by an Export Credit Insurance Policy.
3. Improved Credit Management: A Credit Insurance Company provides monitors the performance of customers and provides a warning in case if potential payment difficulties on the customer’s end. This allows the Exporter to take risk mitigation measures and protect himself.

What is the Cost of an Export Credit Insurance Policy?

The Cost of an Export Credit Insurance Policy is calculated as a percentage of the total export credit turnover of the company. The premium depends on factors such as creditworthiness of the customers, risk profile of the country where the goods are being exported and prior claims experience of the exporter.

Conclusion

An Export Credit Insurance Policy insures the complete export turnover of the company and not any specific transaction. Qian is an experienced Trade Credit Insurance Broker in India with experience of serving clients across diverse industries for their Credit Insurance requirements.

If you wish to purchase a Trade Credit Insurance Policy, you can email us at insurance@qian.co.in or call us on 022-22044989. We would be glad to assist you.

1. Trade Credit Insurance Policy – Coverage, Benefits and Exclusions
2. Forget all your worries about Bad Debts
3. Solution
4. You can protect yourself from Risk of Bad Debts by purchasing a Trade Credit Insurance Policy
5. What is a Trade Credit Insurance Policy?
6. What does a Trade Credit Insurance Policy Cover?
7. Protracted Default/Delayed Payment
8. Insolvency
9. Political Risks
10. What are the Benefits of a Trade Credit Insurance Policy?
11. Protection against Bad Debts:
12. Potential for Increased Sales:
13. Better Cash Flow:
14. How does a Trade Credit Insurance Policy work?
15. What is the Premium for a Trade Credit Insurance Policy?
16. What is the Sum Insured for a Trade Credit Insurance Policy?
17. What are the Exclusions under a Trade Credit Insurance Policy?
18. What is the Claims Process under a Trade Credit Insurance Policy?
19. Will my Premium be higher if I purchase a Trade Credit Insurance Policy through an Insurance Broker?
20. Interested in purchasing a Trade Credit Insurance Policy and securing the risk of Bad Debts?