Coface Country Risk Conference 2007 The changing shape of political risks insurance Charles Berry Chairman, BPL Global

Coface Country Risk Conference 2007 BPL Global – Emerging Market Risk Insurance broker specialising in Emerging Market Risk Political Risk Insurance (PRI) Trade Credit Insurance Terrorism and Political Violence Insurance Founded 1983 Based in London and Paris Independent, employee owned International client base: –major corporations and financial institutions Global Partners: –USAItaly –AustriaBrazilChile

Coface Country Risk Conference 2007 PRI Market – Product Overview Non-Payment Insurance: Special Risks Sovereign / Government Buyers / Obligors Single Risk / Medium Term Emerging Market Private Buyers Equity Form PRI: Investment Insurance Lenders PRI Property Based PRI: Terrorism, Political Violence etc covers

Coface Country Risk Conference 2007 Overview Period ECAs and the Private Market Basel II & product innovation Pricing

Coface Country Risk Conference 2007 CSL LIB LIMIT PWH TAL Ark 5 Atrium EIC 1 FCIA HCC HIS KLN LIU NVA RTH Unistrat AFB SJC 4 ACE Chubb Sovereign AIG ONDD 2 Zurich Coface EulerH AIG QBE Ducroire SJC 4 CSL KLN LIB PWH ACE 3 AFB Ark 5 Atrium Chubb EIC 1 FCIA HCC LIU NVA Unistrat Trade related single obligor risks ZurichONDD 2 Maximum Credit Period (years) 1. $5m net line has no limitation on credit period 4. No formal maximum but non-structured credit usually max. two years 2. No maximum - depends on goods/project/country 5. Normal maximum five years but exceptionally seven or even ten 3. Structured credits - otherwise three years Atradius

Coface Country Risk Conference 2007 ECAs and the Private Market The market gap ECAs as facilitators, packagers and syndicators Co-operation and competition

Coface Country Risk Conference 2007 Basel II - Overview Basel II will impact trade and commodity finance in emerging markets adversely Comprehensive non-payment insurance policies can qualify as Credit Risk Mitigation (CRM) under Basel II

Coface Country Risk Conference 2007 Background to Basel II Regulators catching up with industry practice New forms of guarantees »Unfunded Risk Participations »Credit Default Swaps ….a wider range of credit risk mitigants (CRM)…. »June 2004 Framework: para. 110 Non-payment insurance policies are an acceptable guarantee under Basel II, subject to them meeting the operational requirements FAQ #6, BIS website, Oct.2002

Coface Country Risk Conference 2007 Basel II CRM – 2 key points All conditions within direct control of the Bank an unconditional guarantee can have conditions The bank must control residual risks …it is imperative that banks employ robust procedures and processes to control [residual] risks »June 2004 Framework, Para. 115 re Overarching issues of CRM

Coface Country Risk Conference 2007 BPL Global & Basel II Product Non-payment insurance policies can meet the criteria for Basel II compliant CRM Process BPL Global helps Bank clients control the residual risk Proof BPL Globals claims statistics show that our non-payment insurance works

Coface Country Risk Conference 2007 BPL Global Claims Experience - Non-Payment Insurance works! Failure to pay policies PRI only / misc policies Total Problem resolved Full Settlement Compromised Denied of which - paid after arbitration - arbitration lost - denial accepted Pending Totals Source: BPL Global Claims Dept. Claims from 1983 to May 2007 E. & O.E.

Coface Country Risk Conference 2007 Non-Payment Insurance - Improvements Conditions Within direct control of Policyholder Removal of traditional exclusions E.g 5 Great Powers War Exclusion Lloyds March 2007 new regulations Shorter Waiting Periods Clear claims procedures and timetables

Coface Country Risk Conference 2007 …but it's still insurance Principle of Indemnity Utmost Good Faith Proving a Loss vs. Pay first argue later

Coface Country Risk Conference 2007 PRI Market – Final Thoughts Non-Payment Insurance: Special Risks Sovereign / Government Buyers / Obligors Single Risk / Medium Term Emerging Market Private Buyers Equity Form PRI: Investment Insurance Lenders PRI Property Based PRI: Terrorism, Political Violence etc covers