Export credit insurance
A public or private policy or guarantee protecting an exporter or its bank against the risk of non-payment by a foreign buyer, whether commercial (insolvency) or political (war, embargo, transfer risk).
Export credit insurance was born in the aftermath of the First World War, to support international trade at a time of high political risk and private market failure. The first public agency, the British ECGD, was founded in 1919; Coface followed in France in 1946. The principle is to cover an exporter, or the bank financing the transaction, against the risk that the foreign buyer does not pay, for a commercial reason such as insolvency or a political one such as civil war, expropriation, exchange controls or a state decision to suspend payments. Public export credit agencies act as a market of last resort for risks the private sector will not take alone, notably transactions in high-risk countries or over tenors above seven years. The Berne Union brings them together with private insurers and multilateral institutions. Private credit insurers, led by Allianz Trade (Euler Hermes until 2022), Atradius and Coface, cover mostly short-term risks on solvent markets. Public export support runs into WTO rules on subsidies, which led to the OECD Arrangement of 1978 setting minimum premiums and common conditions. Once the public agency has paid and the debtor is a state, the claim is not recovered in one go: it goes into the renegotiation of the country's debt at the Paris Club, which reschedules it or writes part of it off. With economic sanctions and fragmented supply chains, some states again use export credit insurance as a foreign policy tool, adjusting guarantees according to destination.
Textbook case: a French turbine manufacturer signs a 200-million-euro contract with a state-owned power utility in South Asia, financed over eight years. The French bank refuses to finance without a public guarantee. Bpifrance Assurance Export guarantees 95% of the buyer credit against political and commercial non-payment risk. Eighteen months later, a currency crisis leads the central bank to suspend transfers abroad: the guarantee responds, the bank is indemnified after the claims waiting period, and the French state, subrogated, takes the claim to the Paris Club table, where it will be rescheduled over years.
- OECD, Arrangement on Officially Supported Export Credits, 1978
- Exportkreditgarantien der Bundesrepublik Deutschland, "In eigener Sache", March 30, 2022
export credit insurance, ECA, export credit agency, buyer credit cover
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