Needs of Czech exporters, investors and of their financing banks as well as overall tendencies in international trade are a basic guideline for EGAP when amending already functioning and time-tested insurance products and in preparing new ones. Presently, EGAP introduces into practice a number of changes benefiting our clients. First and foremost, insurance premium rates decreased significantly in insurance of the so-called manufacturing risk (insurance of the type "V"). It is the frequently concluded insurance when an exporter insures against the risk of losses caused by cancellation or discontinuation of an export contract on importer's part or of losses resulting from political, financial and/or macro-economic situation of importer's country. When the insurance against these risks is a stand-alone product, the new insurance premium rate is lower by 30 per cent and when the insurance of an export buyer risk (insurance of the type "D") has been concluded in respect of the same export transaction, it is lower by as much as 50 per cent. EGAP has respected the fact here that risks covered by these insurance policies overlap to some extent.
Czech investors who have negotiated a bank credit with EGAP's insurance for realization of their investment plan can make substantial savings. Unlike earlier practice when an iínvestor had to pay for the insurance of own resources invested into a project in the host country against political risks (insurance of the type "I"), the investor receives as a bonus the insurance of own invested funds for the whole duration of drawdown and repayment of the credit.
Although the insurance of a credit for financing of an investment abroad belongs among recently introduced products, EGAP went about its modification based on acquired experience in order to comply with needs of developers of commercial and residential projects abroad. Conditions for the insurance of bank credits for projects of developers have been made "softer" respecting the fact that cash-flow and repayment of the credit are in these cases usually quicker. Therefore, e.g. non-monetary investments may make up to one half of own resources which have to be in the of at least 20 per cent of investment expense and, simultaneously, 100 per cent collateral is not required for the commercial risk of the outstanding investment credit. This collateral may be substituted by a combination of collateral reduced to 30 per cent of the credit and of another security. However, the developer should have buyers with sufficient financial strength for a significant part of the premises.
The insurance of an export buyer credit (insurance of the type "D") has also underwent through another modification for the purposes of the project financing, i.e. financing of the construction of a new economically and legally independent unit, usually a subsidiary called Special Purpose Vehicle; its receipts serve subsequently as a sole source of repayment of credit funds. The basis of the project financing is the cash flow of the project which has to guarantee sufficient funds for covering operational expenses and repayments of the credit for the whole duration of credit relationship. The project financing is particularly suitable for realization of large investment goals in the energy sector, extraction and processing of raw materials, metallurgy, production of construction materials, telecommunications, infrastructure and the like where it is possible to negotiate contracts for the purchase of the output in advance. On the basis of specific international rules for this type of credits, it is possible to prolong the maximum repayment term in the project finance up to 14 years and to enable unequal amounts of instalments, and terms of regular instalments can be longer than usual 6 months. Concurrently, scope of insurance cover and amount of the self-retention may be defined separately for the construction period and for the repayment period of the credit.
A totally new content was given to the insurance of prospection of foreign markets (insurance of the type "P") having as its purpose initiation and/or an increase of export of goods and services to one or several countries. Previously, the insured was a bank extending a credit for prospection; interest on exporters? part had been minimal because a possible set-back of the prospection could endanger their position in negotiations for credits for other purposes. Now the exporter will be insured directly against the financial loss arising fully or partially from a failure of prospection which comprises, beside advertising and public relations abroad also participation in commercial campaigns abroad, export and marketing consultancy including analyses as well as legal services, warehousing and certification of products and services in foreign countries. The insurance is intended for exporters with well-established production who have been manufacturing goods or providing services for which prospection should be made for the period of at least 2 years.
Amendment of the insurance of a credit for pre-export financing (insurance of the type "F") is in its final stage of preparation so it could also cover the risk of banks connected to credit financing of commercial utilization of products of research and development for the subsequent export. Research and development products are understood as patented discoveries and inventions, utility and industrial designs, trademarks, know-how but it also can be technical configurations, methods, modes of operations or partial outputs of solved projects to which the exporter has ownership rights. By introduction of this product, EGAP wants to significantly increase probability of a successful completion of commercial applications of outcomes of science and research and to contribute to launching of production and following export of a number of products with highest possible added value.
Rapidly changing forms and conditions of international trade together with continuously growing variety of ways how Czech exporters enter multilateral projects put before EGAP permanently new tasks. All changes in the offer of insurance with state support described above are result of a detailed analysis of needs of the Czech exporters and investors and they help in strengthening of their competitiveness in the world.
Chairman of the Board of Directors
and Managing Director of EGAP