Trade Credit & Political Risk Insurance Product & Market Overview Massachusetts Export Center Export Expo December 10, 2013

What is Trade Credit & Political Risk Insurance? A risk mitigation product that protects a company selling on open account terms against losses due to non-payment and/or delayed payment (protracted default). Trade credit & political risk insurance policies indemnify policyholders for the gross invoice value of goods or services unpaid due to commercial and/or political risks.

What are the Insured Risks? Trade credit & political risk insurance policies protect sellers against the risk of non-payment by both private and government-owned obligors due to: Commercial Risks Bankruptcy or insolvency Delayed payment/protracted default Political Risks Any hostile action by a foreign government that impedes the obligors ability to pay. Confiscation, expropriation, nationalization, cancellation of export/import licenses, seizure of goods, embargoes, repudiation of foreign obligations, etc. Currency inconvertibility and transfer risk. Political violence (terrorism, war, civil strife, insurrection, etc.).

The Market: Two Main Policy Types “Excess of Loss” Underwriters focus their analysis on understanding and evaluating the applicant’s credit and collections procedures. Based on the underwriter’s analysis, policy will provide a discretionary credit limit, which allows insured to establish their own credit limits on certain buyers, subject to conditions. All limits are non-cancellable. “Ground Up” Underwriters focus on buyer creditworthiness and establish a credit limit for all or most of the insured’s customers. Limits are often cancellable.

The Market: Who are the Players? “Excess of Loss” Ace (S&P AA-) Lloyd’s of London Syndicates (S&P A+) AIG (S&P A+) OPIC** Axis (S&P A+) QBE (S&P A+) Catlin (S&P A) Sovereign (S&P AA-) FCIA (S&P A+) US Export-Import Bank** Houston Casualty (S&P AA) XL Insurance (S&P AA-) Ironshore (AM A-) Zurich (S&P AA-) LAU (S&P A) “Ground Up” Atradius (Moody’s A3) Coface (Fitch AA-) Euler Hermes (S&P AA-)

What are the Benefits? Sales Expansion Offer more competitive sales terms. Increase export sales by entering new foreign markets. Increase sales volume to existing customers. Risk Management Mitigate accounts receivable concentration risk. Protect accounts receivable and avoid catastrophic losses. May enable reduction in bad debt reserve. Attractive Financing Insuring receivables may allow for more favorable lending terms. May facilitate off-balance sheet financing though selling of accounts receivable.

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