PROMOTING TRADE AND INVESTMENTS WITH BRICS COUNTRIES Welcome to the presentation on Role of ECGC IN PROMOTING TRADE AND INVESTMENTS WITH BRICS COUNTRIES

RISK!!

SAYING “Anything is possible”, said an intellectual, and “my experience is that the contingencies not provided for are those which happen”

CREDIT IS THE KEY TO BUSINESS GROWTH & PROSPERITY To fill the gap between need and availability of money To maximize utilisation of resources One credit generates series of credits & multiplicity of activities Attention on credit worthiness results in better business management Used as effective marketing tool

Risks in Export Transactions Political instability and civil disturbances in a number of countries such as Afghanistan, breakup of the erstwhile Soviet Union,Syria, Libya continuing events in Africa and South America Transfer delay problems due to scarcity of foreign exchange as in Nigeria, Argentina, Mozambique. Collapse of banks such as in Russia after shift towards market economy Collapse of banks like Meryll Lynch,Lehman Bros., and Insurance companies like AIG … NOW!!

More than one Company Fails Every day! Analysis of data by an Int’l Agency shows that in Advanced Economies EVERY DAY MORE THAN one …. New business is formed Company changes its name Directorship changes Share ownership changes Company changes control AND More than one Company Fails Every day!

General Trade Concepts Know your customer! Know their country! Know their “credit” bank! Understand the trade cycle! Understand Terminology! Understand Transaction Risks! Understand Ground Rules!

RISK MANAGEMENT Definition:- Risk Management Can be defined as identification, analysis and economic control of risks that threaten the assets or earning capacity of the enterprises.

RISK MANAGEMENT STRATEGY FOR RISK MANAGEMENT. RISK IDENTIFICATION RISK ANALYSIS RISK ASSESSMENT RISK REDUCTION

GLOBAL TRADE RISKS Type of Risk How to Mitigate Transit Risk Marine Insurance Exchange Risk Authorised Dealer Credit Risk Various Options

Types of Export Credit Risks

Export Credit Insurance (ECI) Is a cover offered by insurance companies which encompasses the risk of non-payment in export operations Usual risks covered are commercial risks and political risks The commercial risk rests with the buyer; political risk with the country Commercial risks covered include insolvency, default or repudiation. Political risks covered include war/ civil war/ revolutions, imposition of import restrictions, exchange transfer delay/ embargo, diversion of voyage risk.

Need for ECI Imperfect information in banks, trading companies & exporter firms on overseas buyers and their economies Increasing competition has led to the seller’s market giving place to buyer’s market, creating demand for goods being sold on credit terms necessitating protection against bad debts When buyer and seller are in different countries, then apart from the risk on the buyer, other risks are created by the eco-politico and financial situation in the buyer’s country Protection for such export credit risks world over can be provided by ECI schemes

Benefits of ECI Reduces the risk involved in export transactions. Is an effective marketing and sales tool. A policy enables to increase presence in new markets, be more competitive by extending higher and longer credit terms to buyers. Is a smart financial tool as it serves as collateral. Banks view insured clients as competent clients. Reduces the need for Letters of Credit. If an exporter has a policy, there is no need for his overseas client to issue a LC before buying his products or services.

Basic Principles Whole Turnover – ensures spread of risks Coinsurance – to achieve improvement in the quality of risks through risk participation Credit Appraisal – to check acceptability of risk Risks covered Risks not covered Amount covered Rights of subrogation Existence of debt Utmost good faith Indemnity

Hedging by Authorized Dealers EXPORT INSURANCE Goods Receivables Loss or Damage Exchange Risk Payment Risk Hedging by Authorized Dealers Marine Insurance Credit Insurance

You focus on exports, We cover the risks RISK MANAGEMENT How to overcome Export Credit Risk E C G C You focus on exports, We cover the risks

Role of ECGC Providing Credit Insurance Covers to exporters against Credit Risk loss in export of goods & services Providing Export Credit risk cover to banks to enable exporters obtain better facilities from them Providing Overseas Investment Insurance to Exporters - Indian Entrepreneurs in Overseas Ventures (Equity/Loans)

ãäÌã•ã¶ã ãä¶ã¾ããæ㠨ãɥ㠺ããè½ãã Ìã ̾ãã¹ããÀ Ôãâºãâ£ããè ºãñÖ¦ãÀãè¶ã ÔãñÌãã†ú ¹ãƪã¶ã ‡ãŠÀ¶ãã. VISION To excel in providing export credit insurance and trade-related services. ãä½ãÍã¶ã ¼ããÀ¦ããè¾ã ãä¶ã¾ããæ㠺ããû•ããÀ ‡ãŠãè ºãü¤¦ããè ÖìƒÃ ‚ããÌã;ã‡ãŠ¦ãã‚ããò ‡ãŠãñ ¹ãîÀã ‡ãŠÀ¶ãñ ‡ãñŠ ãäÊㆠ„¹ãÊ㺣ã Ô¨ããñ¦ããò ‡ãŠã ‚ã¶ãì‡ãîŠÊã „¹ã¾ããñØã ‡ãŠÀ¦ãñ Öì† ãä‡ãŠ¹ãŠã¾ã¦ããè ºããè½ãã †Ìãâ ̾ãã¹ããÀ Ôãâºãâ£ããè ÔãñÌãã†ú ¹ãƪã¶ã ‡ãŠÀ ¼ããÀ¦ããè¾ã ãä¶ã¾ããæ㠄²ããñØã ‡ãŠãè ÔãÖã¾ã¦ãã ‡ãŠÀ¶ãã ý MISSION To support the Indian Export Industry by providing cost-effective insurance and trade-related services to meet the growing needs of the Indian export market through the optimal utilization of available resources.

A Brief Profile of ECGC Established 1957 No. of Branches 59 Branches ISO Certification HO and All branches certified Capital 1300 Cr Rating iAAA by ICRA Reinsurance Available for ST business 2015-16 PREMIUM INCOME 1320.74 Cr RECOVERY 114.43 Cr CLAIMS 1122.84 Cr DIVIDEND 88.00 Cr No. of Employees 633 Sanctioned

Our Underwriting Capacity……..at a glance Covering 237 Countries Covering Direct Exports Deemed Exports Project Exports Merchanting Exports Consignment Exports Services Exports Software Exports IT-Enabled Services Exports

……’Contd offering cover even to the developing markets - Latin America, Africa, Asia & Asean Countries DP / DA terms are acceptable for cover in these countries Cover for LC Discrepancies Cover for LC’s opened by banks with more than 1,00,000/- WR

Risks Covered by ECGC RISKS POLITICAL RISK COMMERCIAL RISK COUNTRY We cover political risks on countries which have been divided into two groups . Group I are those countries under open cover category where political risks are automatically covered on submission of declaration and payment of premium and for restricted cover countries where prior approval for cover for political risks is mandatory for cover even on political risks to be available. Commercial risk cover is available on buyer for non- LC transactions and for Banks who have opened LCs. COUNTRY BUYER BANK NON – LC LC TRANSACTION

Risks Covered Buyer Risks a) Insolvency b) Protracted default c) Failure to accept the goods LC opening Bank Risks a) Protracted default b) Insolvency

Risks Covered: Political Risks War, Civil War & Internal Disturbances in the buyer’s country Delay in the transfer of payment Shipment Diversion Import Restriction Causes beyond the control of the exporter and buyer

RISKS NOT COVERED Commercial disputes Causes inherent in the nature of goods Buyer’s failure to obtain import license Insolvency / default of Agents Risks covered by general insurers Exchange rate fluctuation Failure of exporter to fulfill terms of contract

IMPORTANT CONCEPTS Wholeturnover-principle Options for exclusion. Co-insurance Maximum liability Credit limit Declaration and Premium Prior approval for RC Countries

BUYER UNDERWRITING FACTORS Financials, creditworthiness etc. Feedback – from other insurers Agreement with Credit Information Agencies Arrangement with D&B ECGC’s Past Experience Exporter’s Experience

COUNTRY UNDERWRITING FACTORS Political Situation Economic condition Relationship with India ECGC’s experience Experience of other Credit Insurers

Products offered to Exporters Standard Policy Small Exporters policy Specific Shipment Policy (short term) Export Turnover policy Specific buyer wise policy Consignment export policy Global entity policy Single buyer exposure policy Multi buyer exposure policy Software project policy IT enabled single customer policy IT enabled multi customer policy Customer specific (Tailor made) policy

ECGC policy covers to exporters fall under 3 categories viz., ECGC Policies ECGC policy covers to exporters fall under 3 categories viz., Specific Transaction covers Turnover covers Exposure covers Specific Shipment Policy is a Transaction cover. A single shipment will be insured for Credit risks

ECGC Policies 2. Turnover covers: SCR, SEC and ETP polices are turnover polices. The exporter will insure his entire turnover barring certain exclusions mutually agreed with ECGC. Monthly declaration of shipments under SCR and quarterly declaration of shipments under SEC and ETP will be submitted. Premium is paid on the actual value of shipments declared.

ECGC Policies 3. Exposure covers: MBEP is an exposure based policy. Instead of taking insurance for the entire Turnover, exporter may choose to insure only a lower amount which he considers is at risk and that amount will be the exposure. A minimum of 10% of the projected turnover has to be offered as an exposure for cover ( Aggregate Loss Limit -ALL). On any single buyer 10% of ALL is covered for losses ( Single Loss Limit-SLL). Premium payable on exposure. ITES and MBEP covers are also exposure based covers. Exporter will have option to choose the exposure that meets his risk appetite.

ECGC Policies 4. Customised Policies: An exporter may choose to obtain a customised cover where he may opt for covering select shipments., select risks etc. Normally MBEP cover is taken as the base policy and additional exposure required on a buyer over and above the SLL can be insured under the same Policy or by issuing a Single Buyer Exposure Policy

Customer Specific Policy Small Exporters Policy & SME Policy Shipments [CR] Policy To Cover all Transactions Export Turnover Policy Multi buyer exposure To encourage Small Exporters Export Factoring For MSMEs For Large Exporters SHORT TERM COVERS Specific Shipments Policy Consignment & Global Entity Policy To cover Consignment exports To cover Specific Transactions To cover Services Services Policy,ITES,Software project Exports (specific buyer) Buyer Exposure To cover Specific Buyer Tailor made cover Customer Specific Policy

Thank You Please contact us at HDFC HOUSE M G ROAD, RAVIPURAM KOCHI 682 015 PH: 0484-2359437/9457 E-mail : kochi@ecgc.in website: www.ecgc.in