In 2007, EGAP concluded 364 new insurance contracts in the total volume of almost CZK 50 billion. Approximately two thirds of this volume is represented by the insurance contracts for insurance of large exports; exports with value exceeding CZK 1 billion are considered as large exports.
Achieved result means a year-on-year increase by approximately 67%. When converted to Euro at average annual exchange rate of the Czech National Bank, this growth was even higher as a result of appreciation of the Czech crown.
During whole period of EGAP’s activities, i.e. in years 1992 through 2007, credits, investments and guarantees in the total amount of CZK 310 billion had been insured with state support.
Multiplication factor of concluded contracts, primarily contracts for insurance of bank guarantees, has been however much larger. In 2007, EGAP enabled with its insurance realization of the contracts in an aggregate amount of approximately CZK 90 billion.
As a result of accumulation of simultaneous completion and insurance of several large exports, the last year’s outcome is a record one in the whole history of EGAP. Similar cumulation of finalization of a larger number of large transactions, which are usually in preparation for several years, had been recorded by EGAP also in 2000 and 2001. This was followed by the period of conclusion of a substantial number of rather smaller insurance policies, which have not significantly influenced aggregate results. It can be expected that similar "natural" development will repeat itself also this time and the considerable increase of the insured volume resulting from a greater number of realized large exports will appear again in several years.
|Country:||Subject of export:||Insured value in CZK|
|Russia||Modernization of FGUP Uralvagonzavod||7.5 billion|
|Russia||Steam-gas power plant Krasavino||2.5 billion|
|Russia||Modernization of metallurgical plant Oskol||2.2 billion|
|Georgia||Investment into hydro-power plants + distribution networks||5 billion|
|Pakistan||Steam-gas power plant Muridke||2.3 billion|
|Azerbaijan||Construction of highway – II. stage||1 billion|
|Monte Negro||Reconstruction of railway track Nikšič – Podgorica||700 million|
|USA||Helicopters Sikorsky (production in Aero Vodochody)||1.3 billion|
In 2007, trend from previous years deepened by significant growth in demand for insurance of export buyer credits extended by banks from aspect of structure of insurance products. Out of the totals amount of about CZK 50 billion of insured volume, fell on this type of insurance almost one half last year. Simultaneously, there was an increase in interest for so-called project finance, i.e. insurance of risks of projects when funds for repayment are gained from sales of products form new production capacity. It can be expected that the number of such projects will continuously increase.
In investment insurance, there was great interest in insurance of a credit for financing of a foreign investment, This insurance product was new in EGAP’s offer last year and, right from the beginning, its share in the up-to-date best results was significant (16%). Option of insurance of a credit also contributed to increased interest in insurance of foreign investments against political risks. Both insurance products participated in the total results by one quarter.
Insurance of credits for pre-export finance, including the simplified version for small and medium-sized enterprises, remained significant by volume as well as insurance of investments of Czech legal persons abroad, insurance against the risk of inability to fulfil the export contract (insurance of the so-called manufacturing risk) and insurance of bank guarantees which plays an important role particularly in participation of Czech exporters in tenders. Each of these products had a share in the aggregate volume of insurance of 8 to 9 per cent.
EGAP insured exports to fifty countries in 2007. The territorial structure was significantly influenced by above-mentioned exports to Russia, Georgia and Pakistan. For the whole duration of its activities, i.e. since 1992, EGAP had insured credits, investments and guarantees to 94 countries.
EGAP paid indemnifications in the total worth of approximately CZK 590 million million in 2007. The largest part amounting to CZK 247 million fell on the insurance loss Ecimex Group (production of colour TV displays). Beside it, EGAP paid primarily indemnifications from insurance losses from previous years. In particular, it was power plant Kolubara in Serbia (approximately CZK 120 million), gas pipeline Kamčatka in Russia (about CZK 135 million) and further insurance losses in Bulgaria, Poland and in Slovakia.
In the same period, EGAP recovered receivables in the total amount of CZK 190 million. The largest share from it falls on the receivable from the insurance loss connected with the export of trams to the Philippines by the company ČKD Dopravní systémy in 2000, which afterwards went into bankruptcy.
The business plan for 2008 assumes conclusion of new insurance contracts it the aggregate volume of CZK 38 billion, of which CZK 15 billion shall be related to large exports. At present, EGAP records several of them in order of tens of billions of Czech crowns. However, it can be said that with a high probability some of them will not be realized at all, some of them will be significantly delayed. Cement factory in Vietnam, a number of glass works in Russia or another gas steam power plant in Pakistan belong among expected large exports in 2008. In case exporters and financing banks will conclude other large contracts, EGAP has sufficient capacity to meet their demand for insurance.
In 2008, EGAP will concentrate on further improvements in conditions of insurance and on increase of comfort of clients in its utilization, primarily by:
Small and medium-sized enterprises remain in forefront if interest. Beside significantly simplified procedures in insurance of pre-export credits and bank guarantees for SMEs, offered by EGAP since 2006, co-operation with banks and factoring companies will be widened also for insurance of short-term export receivables to non-marketable territories (countries outside the OECD). With regard to adoption of rules Basel II, increased interest of banks in higher quality of collaterals for purchased receivables in the form of EGAP’s insurance can be expected.
Based on changes in European and Czech legislation, EGAP prepared a new insurance product for small and micro-enterprises; their export activities are dominantly concentrated on EU countries, i.e. on countries with functioning market economies where EU legislation until recently enabled insurance of short-term supplier credits exclusively on commercial basis. However, small and micro companies are often in practice not serviced by commercial insurance companies because of their small by volume and irregular exports. New insurance has as its aim to fill-in a gap in the market and to enable small exporters to use insurance of export receivables basically under same conditions as there are for large exporters. In order to use this type of insurance, the exporters has to comply with criteria of the EU for classification among SMEs and his annual volume of exports cannot exceed the limit of Euro 2 million. A precondition for introduction of this insurance is acquiring of the consent of the European Commission which is conditioned by evidence of non-functioning of the credit insurance market for these smallest companies. EGAP has been intensively discussing this issue with the European Commission with assistance of the Office for the Protection of Competition and with the Permanent Mission of the Czech Republic with the EU.