Presentation of ecgc, kolkata

EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
You focus on exports. We cover theYou focus on exports. We cover the risks.You focus on exports. We cover theYou focus on exports. We cover the risks.
WELCOME
TO A PRESENTATION ON
INSURANCE & RISK MANAGEMENT
and
ROLE OF ECGC

ECGC Mission
To support the Indian export
industry by providing cost effective
insurance and trade related
services to meet the needs of the
Indian exporters

OBJECTIVE of ECGCOBJECTIVE of ECGC
To PROMOTE EXPORTS Mainly by
• Protecting Exporters against
COMMERCIAL & POLITICAL RISKS In
realising export proceeds
• Protecting Banks against
RISK OF DEFAULT in export credit
• Protecting Investors against POLITICAL
RISKS in Shareholders’ equity and loan In
overseas investments

ECGC Fact sheet
• Established in 1957
• Fully owned by GOI
• Under administrative control of MOCI
• Capital Base
• Highest ICRA rating of IAAA
• 5 Regional Offices and 51 Branch Offices
• All Branches ISO 9001:2000 certified
• Member of Berne Union
• MOU with GOI

Key Performance Highlights
Sr.
No.
Description
Financial Years
( Audited Data)
2010-11 2011-12
1
Gross Premium
income
Rs.885.47 cr. 1004.80 cr.
2 Claims Paid Rs.620.53 cr. 712.96 cr.
3
Recoveries
Received
Rs.136.07 cr. 168.69 cr.

What is Risk?What is Risk?
Uncertainty about future outcome due to :
Unexpected occurrence of events
– Uncontrollable factors
– Lack of Information

Risk PerceptionsRisk Perceptions
• Industry risk
• Business risk
• Risk of contract frustration
• Risk of physical damage
• Credit risk
• Country Risk

What is Credit Risk
• Definition: The potential that a debtor will fail to
meet its payment obligations in accordance with
agreed terms.
• Export credit risk:
a) Buyer related problems
b) Country related

Risk ManagementRisk Management
Analysis, acceptance or mitigation
• Risk avoidance
• Risk Transfer
• Risk Sharing
• Risk retention

PAYMENT RISK
RISK MANAGEMENT IN EXPORTSRISK MANAGEMENT IN EXPORTS
Goods Receivables
Exchange
Risk
Loss or
Damage
Marine
Insurance
Hedging by
Authorized
Dealers
CREDITCREDIT
INSURANCEINSURANCE

LC
Payment Risks
POLITICAL RISK
COUNTRY
BUYER BANK
LC / NON – LC
COMMERCIAL RISK
Payment RisksPayment Risks

Role of ECGC as an Export Credit
Insurer
• ProvidingProviding export credit insurance coversexport credit insurance covers toto
ExportersExporters
against loss in export of goods & services underagainst loss in export of goods & services under
ST & MLT (ST & MLT (POLICY Scheme)POLICY Scheme)
• ProvidingProviding export creditexport credit insurance coversinsurance covers toto
Banks & FI’sBanks & FI’s
to enable exporters obtain better facilities fromto enable exporters obtain better facilities from
themthem (ECIB)(ECIB) (formerly known as Guarantees)(formerly known as Guarantees)

War, Civil
war, Internal
disturbances
exchange
transfer
blockage
s/delay
New import
restrictions,
cancellation of
import licence,
etc.
New import
restrictions,
cancellation of
import licence,
etc.
Risks covered -Political
Diversion of
voyage due
to war
Diversion of
voyage due
to war

Insolvency
of
buyer/bank
Non
acceptance
of exported
shipment
Default of
buyer/bank
Risks covered- Commercial

Risks NOT considered Credit riskRisks NOT considered Credit risk
• Non fulfillment of contractual obligations by exporter
including quality dispute.
• Default or insolvency or any omission /commission of any
agent of exporter/ buyer
• Failure of buyer to obtain necessary approvals for imports
• Causes inherent in nature of goods
• Exchange fluctuation risks
• Physical loss/damage to goods

Principles of Credit InsurancePrinciples of Credit Insurance
• Good Faith
• Co-insurance
• Spread of risks

Buyer & Country Underwriting
• The 2 pillars of Export Credit Insurance :
and
BuyerBuyer
UnderwritingUnderwriting
that assessesthat assesses
buyer risksbuyer risks
Limit fixed on BuyerLimit fixed on Buyer
CountryCountry
UnderwritingUnderwriting
that assessesthat assesses
country riskscountry risks
Country classificationCountry classification

Products offered to Exporters
Declaration Based Policies
Whole Turnover
1) Standard (SCR) Policy
2) Small Exporters Policy
3) Export Turnover Policy
Specific transaction
1) Specific Shipment Policy
2) Specific Buyer Policy
3) Transfer Guarantee (for Banks)

Exposure Based Policies
1) Single Buyer Exposure Policy
2) Multi buyer Exposure Policy
3) SME Policy

Consignment Based Policies
1) Consignment Export Policy
2) Global Entity Policy

Covers for IT/ITES industry
1) Software project exports policy
2) IT enabled (single customer) policy
3) IT enabled (multi customer) policy

Premium Structure BasisPremium Structure Basis
• Country Grouping - 7 fold (237 countries)
( A1, A2, B1, B2,….. D)- Higher the country
group, lower the premum rates
• Terms of Payment- More superior the payment
terms, lower the premium rate
• Specific approval required for Restricted Cover
countries

Shipments (Comprehensive Risks) Policy
• Whole Turnover principle
• Selective options for exclusion-
LC/ Associates/ Consignments
• 90% cover
• Minimum premium of Rs.10,000/-
• Policy Period - 2 years
• Buyer wise Credit limit
• Discretionary limit
• Monthly declarations with premium
• No Claim Bonus – yearly 5%; max 50%

Small Exporters Policy
• Turnover not exceeding Rs.50 Lakhs p.a.
• Minimum Premium Rs.2000/-
• Policy Period - one year
• Higher percentage of cover-
Commercial risks 95%;
Political risks 100%
• No Claim bonus
• Quarterly Declarations

Specific Shipment Policy (SSP)
• Covering one shipment or One contract
• Processing fee of Rs.1000/-
• 80% cover
• Premium higher than standard premium rates
• Upfront premium before issue of Policy
• Commercial / Political risks and L/C
comprehensive risks covered
• Submission of Shipment Statement and
realisation report

SME POLICY
• For exporters with Export Turnover not
exceeding Rs10 Lakhs and registered under
MSME Act, 2006
• Cover available upto Rs10 lakhs.
• Annual premium Rs 5,000 and processing
fee of Rs1,000
• 90% cover
• Maximum claim payable is Rs3 lakhs on any
buyer
• No requirement of monthly declaration of
shipments

Benefits For Exporters
• Protection for account receivable
• Reduction in Bad debt
• Improvement in quality of financial planning
• Enhancement in risk taking capacity
• Easy access to bank finance on liberal terms

ECIB’S TO BANKS
• Contract of insurance between bank & ECGC
• Protects banks against losses in export credit
due to
- Insolvency of exporter
- Protracted default of exporter

Benefits For Banks
• Protection For Pecuniary Liabilities Against
Funded and Non Funded Credit Facilities To
Exporters
• Enables To Waive Collateral Securities
• Lesser Capital Deployment requirement.

In the Service of Exporters and
Banks since 1957
Thank YouThank You
Please visit us at: www.ecgc.in
: kolkata@ecgc.in;ero@ecgc.in

Presentation of ecgc, kolkata

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