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Main Features of Export Credit Cover

Federal export credit guarantees support German enterprises in their efforts to open difficult markets and expand traditional markets in unfavourable times. By taking out Federal guarantees, German exporters and banks protect themselves from the country and buyer risks involved in export transactions. Guidelines ensure that a globally responsible approach is taken.

Political and commercial causes of loss

Export credit insurance protects companies from losses due to non-payment for political and commercial reasons. Political causes of loss can be, besides lack of hard currency in the buyer`s country, for example wars, civil unrest or a payment moratorium imposed by a government. Commercial causes of loss are payment default by the customer or e.g. his insolvency.

The export credit cover available from private insurers is severely restricted over a wide area of business. In particular exports - and this refers primarily to export transactions with extended credit periods involving capital goods – to highrisk markets can often only be realized with the help of state export credit cover. The government thus steps into the breach when the privately owned insurance industry does not provide sufficient cover. It is for this reason that all the Western industrialized countries, but also several developing and threshold countries, have established state-supported schemes for the promotion of their country’s exporting companies. In this way, Hermes cover provides a level playing field for German exporters in the international competitive arena.

Whereas there is very little demand for Federal Government cover for exports to Western industrialized countries, a large proportion of exports to the developing and threshold countries is secured by Hermes guarantees. These countries account for 75 % of all export guarantees granted.

By mandate of the Federal Government

Budgetary responsibility for this instrument for the promotion of exports lies with the Federal Government. They decide on basic issues of cover policy and the granting of guarantees in an Interministerial Committee (IMC).

Back in 1949 the Federal Government issued a mandate entrusting the management of the export credit guarantee scheme to two private companies today called Euler Hermes Kreditversicherungs- AG and PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft.

Since Euler Hermes is lead partner in this consortium, this type of cover became known among German companies as "Hermes Cover". Long years of experience have given the two companies a comprehensive know-how base in the fields of export finance and export credit cover. They offer a customer-focused consultancy service to exporters and banks. In close cooperation with them, they prepare the cover applications for the decision to be made by the Federal Government. After cover has been granted by the Federal Government, the Euler Hermes and PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft experts stand ready to accompany the insured companies with ongoing advice on the project in hand. In the event that receivables are lost, they process claims without delay.

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