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Insurance of export buyer’s credits against commercial and political risks (Product D)

Insurance of export buyer’s credits against commercial and political risks (Product D)

Buyer’s credit insurance is one of the most frequently used insurance products of EXIMBANKA SR. It serves to minimize export risks with financing through an export buyer’s credit. The insured in this case is the bank of the Slovak exporter.

Insurance of a buyer’s credit is used in the case that the foreign buyer finances its purchase from an export buyer’s credit, which the bank of the Slovak exporter provides. The insured is thus the bank financing the Slovak export. Through the insurance EXIMBANKA SR takes on a broad scale of the risks that may arise during the duration of an export contract. The financing bank thus gets the certainty that it will not lose its money. Often such insurance is a condition of the bank for providing the buyer’s credit.

Advantages for the exporter

  • You can get the payments for an order without any problems since it´s not you, but the financing bank that bears the risk of non-payment.
  • Ensuring the necessary liquidity – your export receivable will be quickly reimbursed
  • Your competitiveness grows, since you have the opportunity to offer the buyer, in addition to your own products, a longer repayment period, which may play a key role for him in the selection of a partner in a given project.
  • Such financing is usually under more advantageous conditions than from local sources.
  • Our experienced team will accompany you from first contact during the entire duration of the contract. We offer you our long years of expertise in the field of export financing (risk analysis of the country, buyer, bank, impact on the environment, and others).

How it works

Insurance for export buyer’s credits against commercial and political risks (Product D)

  Insurance procedure
1. Buyer´s credit
The foreign buyer needs a credit for the payment for the delivery of goods from your company. In addition to the delivery of your products, you can provide buyer with advantageous financing of his purchase.
2. Customer credit insurance

Your bank wishes to be insured against the risk of credit repayment default and therefore asks EXIMBANKA SR for insurance. After application assessment and thorough analysis of the export territory and all participating parties (exporter, financing bank, buyer and/or his bank), the insurance contract is signed.

3. Indemnification
After the insurance premium payment, the insurance contract becomes effective. In the case of insurance claim, EXIMBANKA SR provides the indemnification.

Frequently asked questions

When is such insurance most advantageous?
The insurance is suitable primarily with large financial volumes, such as, for example, the export of machine production, industrial technologies or investment units.

What is the period of the insurance?
The period of the insurance is derived from the duration of the provided buyer’s credit. A buyer’s credit is usually used for financing mid- and long-term export contracts, that is, those with a maturity of more than 2 years. In specific cases the export buyer’s credit is also used with short-term trades with a maturity of up to 2 years.

What are the basic conditions of the insurance?
• The foreign buyer must pay at least 15% of the value of the contract directly to the exporter before or no later than with the supply of goods or services. This condition does not apply if the period of maturity of the credit does not exceed 2 years.
• The portion of the contract financed by the buyer’s credit may thus achieve a maximum of 85% of the value of the contract. This condition does not apply if the period of maturity of the credit does not exceed 2 years.
• The financing bank shares in the risk of non-payment of the loan minimally 5% of the provided credit. A portion of its participation (usually half) may transfer to the exporter.
• The share of local costs (i.e. costs having their origin in the buyer’s country) cannot exceed 30% of the total volume of the contract.
• Our mission is, among others, to support employment and the development of production capacities in Slovakia. For this reason the Slovak share in the export is an important criterion when assessing your project.

And what about impact on the environment and the social impact of the case?
EXIMBANKA SR respects its international obligations. For this reason with projects with a maturity of the loan longer than 2 years we assess their impact on the environment and the observing of human rights in the communities affected by the project. Evaluation begins with the submitting by the exporter of a filled in questionnaire which is an appendix to the insurance application. After determining the importance of the impact of the export on the environment, we assign your project to one of three categories(A, B, C) and on the basis of this we decide whether the export will be assessed by a professional appraisal of the impact of the export on the environment.

What kind of risks does the insurance cover?
The insurance is intended for non-marketable risks, i.e. those which commercial banks and insurance companies are not willing or not able to insure. The insurance covers:
• commercial risks – the risk of non-payment of a receivable, especially due to insolvency or payment unwillingness of the buyer;
• political risks – risk of non-payment of a receivable for political and administrative accidental or hard to foresee events in the country of the buyer, such as, e.g. war or other armed conflict, terrorism, unrest, strikes, revolutions, nationalization, embargo, the impossibility of transfer of payments and others. Natural disasters, such as floods or earthquakes, are also included here.

How much will it cost?
The amount of the premium rate depends on several factors, such as the country of the foreign buyer, the credit of the foreign buyer, the length of the contract, the method of ensuring payments, delay of payments, participation of the financing bank and the like. The premium rate is assessed for each project individually.

How is the insurance paid for?
The insured (the bank) pays the premium in one payment in advance. By payment of the insurance premium the insurance policy enters into force.

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