Short description of insurance product and contacts
Right at the tail end of the year, Mr Kladívko’s company won a client in Kazakhstan (a state-owned construction company), which was willing to sign an exceptionally large contract for the supply of nails and other materials worth 50 million crowns. The customer has been allocated funds from the central government’s budget for this contract and needs to spend part of this appropriation by the end of the year. Consequently, it is offering Mr Kladívko a 30% payment upfront (i.e. CZK 15 million) prior to the actual supply. In return, the Kazakh company requires a bank guarantee that the upfront payment will be refunded if the supply of nails does not subsequently go ahead. In this situation, Mr Kladívko needs his bank to provide a down-payment bank guarantee for CZK 15 million, which is covered by EGAP. Following an analysis, a three-party insurance contract is signed between Mr Kladívko, the bank and EGAP. Mr Kladívko has his financial director draw up a budget for the use of the nail production down payment. If Mr Kladívko exports the goods in a due and timely manner, the bank guarantee and insurance will end. If he is unable to make a delivery properly (or if, for instance, insolvency proceedings are brought against him), the state-run Kazakh company may invoke the guarantee, requiring the bank to refund the down payment to it. EGAP then pays the money to the bank.
The bank guarantee is bank's obligation to satisfy the beneficiary (entitled entity) up to a certain financial amount depending on the contents and conditions of guarantee. The beneficiary may be the importer or importer's bank.
The bank guarantee shall be issued by the bank based on exporter's (mandator's) request in view of the conditions of concluded export contract or announced tender. Most frequently, the banks issue guarantees for Czech exporter's bid (Bid Bond), for returning the advance payment by importer (Advance Payment Bond) and for the proper performance of export contract (Performance Bond). Also other types of guarantees may be issued in connection with conditions of acquiring or performing export contracts. The bank is insured hereby against the risk of unauthorised and optionally also authorised drawing from the guarantee by the beneficiary, to the benefit of which the guarantee is issued.
Ing. Petr Martásek, Director of Export Credit and Investment Insurance Department +420 222 842 340 +420 222 844 130 email@example.com
Ing. Michal Pravda, Deputy Director +420 222 842 348 +420 222 844 130 firstname.lastname@example.org
Basic Conditions of Z - SMEs Insurance
The share of value of supplies with the origin in the Czech Republic in the total export value exceeds 50 %,
in case of advance payment guarantee exceeding CZK 50 mil. the purposefulness of drawing advance payment will be checked at cost of insured bank by an independent inspection company determined by the bank (for a lower value of guarantee, this inspection will take place upon EGAP' request)
trouble-free credit history1 of guarantee mandator
unambiguous mandator's duty to assure for beneficiary a guarantee as per the conditions of the export contract or conditions of competition
the guarantee is not in contradiction with international commercial usage for bank guarantees
the guarantee value does not exceed the percentage share of the total export value usual for individual types of guarantees based on international commercial usage
1 The trouble-free credit history shall be interpreted as absence of record on Subject's default payment (of principal as well as accessories) in the credits register for the term of minimally last 5 years. In the CR, it is the Central Credit Register maintained by ČNB (for legal entities, having the credits in banks or subsidiaries of foreign banks operating on CR's territory), a similar register exists abroad.