Insurance of Bank-financed Medium- and Long-term Export Supplier Credit Covering Default Risk
Cf - SMEsInsurance of Bank-financed Medium- and Long-term Export Supplier Credit Covering Default Risk
Short description of insurance product and contacts
Sole trader Jan Kladívko comes home from an exhibition in Azerbaijan with the success of having found a new customer wishing to purchase nails and other materials for 20 million crowns, provided that there is a 30-month payment window for goods supplied. While this is a huge triumph for Mr Kladívko, it comes with risks attached. What if the new customer doesn’t pay for the nails? For Czech sole traders, a twenty-million-crown default could put them out of business. What’s more, Mr Kladívko can’t wait 30 months for his money, because these are funds he needs for further production. He enters into an export contract with the importer and contacts his bank, which runs a solvency test at EGAP. The bank then concludes an insurance contract with EGAP and a factoring contract on the purchase of an export account receivable with Mr Kladívko. However, EGAP requires an upfront payment of at least 15% from the Ukrainian importer. Mr Kladívko exports the goods and sells his account receivable to the bank, for which he receives immediate payment. As far as Mr Kladívko is concerned, that is the end of the matter. Any default by the Azerbaijani importer is handled by EGAP and the bank.
The export supplier's credit financed by the bank is the credit provided by the exporter to the importer (foreign entity) in the form of deferral of payment for the delivered goods or services (export claim), bought from the exporter subsequently by the bank without possibility of retroactive sanction.
The insurance terms and conditions shall follow the rules of OECD Consensus (Arrangement on Officially Supported Export Credits). The maturity of the middle-term and long-term export supplier's credit is longer than 2 years and the importer shall pay in advance (advance payment) minimally 15 % of the total export value (price agreed in the export contract). The insured entity is bank against the risk that the importer does not pay properly the whole owing sum, i.e. the price for the delivered goods and services (export claim) in the due date. The insurance policy shall be signed also by the exporter acknowledging all his obligations following from the insurance policy, especially to assure a proper performance of export contract.
Ing. Petr Martásek, Director of Export Credit and Investment Insurance Department +420 222 842 340 +420 222 844 130 firstname.lastname@example.orgIng. Michal Janků, Deputy Director +420 222 842 354 +420 222 844 130 email@example.comIng. Štěpán Kolanda, Deputy Director +420 222 842 321 +420 222 844 130 firstname.lastname@example.org
Basic Conditions of Cf - SMEs Insurance
maximum credit amount is 85 % of the total export value1
the maturity of the insured loan / receivable is 2 years and longer, maximum 5 years
The maximum amount of the credit/receivable is CZK 40,000,000
evaluation of export influence on the life and social environment and non-applying international sanctions
The exporter (unless a foreign company) is an exporter meeting the definition set out in Act No. 58/1995
The exporter meets the criteria for SMEs in accordance with Annex I to Commission Regulation (EC) No. 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in the application of Articles 87 and 88 of the Treaty (General Block Exemption Regulation)
The exporter is not the subject of criminal prosecution, and is not a liable party in the enforcement of a ruling, in enforcement proceedings or in insolvency proceedings
The debtor (importer) and the exporter are not interlinked economically or financially
The export, the country of destination of the export, and the entities involved are not subject to international sanctions
The share of the value of supplies originating in the Czech Republic in the export value is more than 50%
the share of local cost does not exceed 15%, or exceptionally 30 % of Export Contract Value2,
The insurance of credit or an account receivable linked to agricultural products listed in Annex 1 to the Agreement on Agriculture, constituting part of the Agreement Establishing the World Trade Organisation (WTO), the maturity of which must not be more than 18 months (from the starting point of credit to the contractual final maturity date)
1 The price agreed in the export contract
2 Export Contract Value as per OECD Consensus represents the value of supplies from the Czech Republic and the third countries, i.e. the value of export contract decreased by the value of local supplies i.e."Local Costs"