Insurance of a credit for the financing of investment

The insurance is intended for companies needing a credit for their investment plan. The Insured is the bank or other financial institution extending the loan to the investor with maturity of at least 3 years. The credit may be used for acquisition of long-term tangible or intangible, or financial assets by a foreign company, for building-up of stocks or for the working capital of the foreign company. A partial financing of the investment from own sources of the investor is a precondition for the insurance of the investment in foreign countries.

The insurance covers the commercial risk, i.e. the risk of insolvency or protracted default of the borrower (investor). The scope of the cover of political risks, e.g. expropriation without a proper compensation or impossibility of transfer of profits to the Czech Republic, is at Insured's discretion. EGAP may insist on the insurance of the political risks in case the host country belongs into the category of countries having the higher level of the political risks.

The insurance premium rate depends primarily on the extent of the risk cover, on the category the country is classified into in respect of the level of the political risk according to the OECD Arrangement and on the quality of surety instruments. The lower rate is applied in case the Czech Republic has concluded with the host country a treaty on protection and support of investment.

The insurance of investment in foreign countries against political risks has been offered by EGAP since 1998. However, the new type of the insurance accepts also the commercial risk, i.e. the risk the investment will not be recouped. The similar extent of the risk cover is quite unique and EGAP expects to open in this manner possibilities to invest and to penetrate foreign markets for a substantially wider range of Czech companies than before.