Export credit insurance (ECI) protects an exporter of products and services against the risk of non-payment by a foreign buyer. In other words, export credit insurance ( ECI ) significantly reduces the payment risks associated with doing international business by giving the exporter conditional assurance that payment will be made if the foreign buyer is unable to pay. Simply put, exporters can protect their foreign receivables against a variety of risks that could result in non-payment by foreign buyers. Export credit insurance ( ECI ) generally covers commercial risks, such as insolvency of the buyer, bankruptcy, or protracted defaults (slow payment), and certain political risks such as war, terrorism, riots, and revolution. Export credit insurance ( ECI ) also covers currency inconvertibility, expropriation, and changes in import or export regulations. Export credit insurance ( ECI ) is offered either on a single-buyer basis or on a portfolio multi-buyer basis for short-term (up to one year) and medium-term (one to five years) repayment periods.
• Export credit insurance ( ECI ) allows exporters to offer competitive open account terms to foreign buyers while minimizing the risk of non-payment.
• Even creditworthy buyers could default on payment due to circumstances beyond their control.
• With reduced non-payment risk, exporters can increase export sales, establish market share in emerging and developing countries, and compete more vigorously in the global market.
• When foreign accounts receivables are insured, lenders are more willing to increase the exporter’s borrowing capacity and to offer attractive financing terms.
Short-term export credit insurance ( ECI ) , which provides 90 to 95 percent coverage against commercial and political risks that result in buyer payment defaults, typically covers (a) consumer goods, materials, and services up to 180 days, and (b) small capital goods, consumer durables, and bulk commodities up to 360 days. Medium-term ECI, which provides 85 percent coverage of the net contract value, usually covers large capital equipment up to five years. Export credit insurance ( ECI ) , which is often incorporated into the selling price, should be a proactive purchase exporters already have coverage before a customer becomes a problem.
Where Can I Get Export Credit Insurance?
Export credit insurance ( ECI ) policies are offered by many private commercial risk insurance companies as well as the ExIM Banks around the world, which are the government agencies that assist in financing the export of goods and services to international markets.