How can it help me?
Export credit insurance can help protect your export payments.
What is it?
Export credit insurance—also called export payments insurance—can protect you against the risk of non-payment by your overseas buyer due to defined commercial or political events.
How does it work?
Export credit insurance can protect you:
- from the time you enter into an export contract with your buyer (pre-shipment cover) or
- from the time you ship the goods to your buyer (post-shipment cover).
Commercial events which can prevent you from being paid include your buyer’s insolvency. Political events include war, civil war or inability to convert local currency or to transfer it out of your buyer’s country.
The insurance policies available to you depend on the payment terms of your export contract and are generally:
- short-term credit insurance, for payment terms of less than two years (and usually for terms of around 180 days or less) or
- medium- to long-term credit insurance, for payment terms of two years or more.
A short-term export credit insurance policy may cover part or all of your export business, while a medium- or long-term export credit insurance policy is usually for a particular export contract.
Your insurer will ask you for details of:
- your overseas buyer or buyers, who will usually be subject to a credit assessment by the insurer
- the payment terms you’re offering. In general, the longer the payment period in your export contract, the higher the risk of non-payment.
While short-term policies are fairly standard, each export credit insurance policy is tailored to some extent to the circumstances of your export business, your industry and the provisions of your export contracts. Important variations between policies include:
- for a multi-buyer policy, the amount of cover the insurer will provide for each individual buyer
- the level of indemnity (cover) you receive for a loss (expressed as a percentage of the total loss). The indemnity may differ for commercial and political events
- the qualifying period—that is, how long you have to wait before the insurer settles a claim.
The diagram below shows how export credit insurance works.
Notes to diagram
- You enter into an export contract with your buyer.
- Your insurer provides export credit insurance to you, covering you against the risk of non-payment by your buyer due to defined commercial or political events.
What are the pros and cons?
| Pros |
Cons |
| Protects you against non-payment as a result of defined commercial or political events |
You are not covered if non-payment is due to your failure to fulfil an export contract |
| Can give you more confidence to offer competitive extended payment terms to your buyers |
You are not covered if you don’t comply with the terms and conditions of your insurance policy |
| Can increase your borrowing potential by protecting your export accounts receivable, which your bank may then accept as security for a loan |
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What costs are involved?
The fees and charges for export credit insurance vary depending on the insurer’s risk assessment, the term of the policy and the amount insured.
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