B - SMIVsInsurance of Short-term Export Supplier Credit Covering Default Risk

Case Study:

Sole trader Jan Kladívko comes home from an exhibition in Azerbaijan with the success of having found a new customer wishing to purchase nails for 10 million crowns, provided that there is a six-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 ten-million-crown default could put them out of business. Because he is a sensible type, he takes the contract he has signed with the importer to EGAP. EGAP runs a solvency test on the Ukrainian importer and, if the result is favourable, enters into an insurance contract with Mr Kladívko. If the importer pays on time, everything is all right and the insurance contract ends. However, if the importer defaults, Mr Kladívko receives his money from EGAP instead.

Product description:

The export supplier's credit is a 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).

The maturity of short tail export supplier's credit (export claim) is shorter than 2 years.  The export supplier's credit has not a character of a bank credit. The insured entity is directly the exporter against the risk that the importer does not pay in the due date properly the whole owing sum, i.e. the price for the delivered goods and services (export claim).

• The insured credit/receivable is payable within 2 years
• The maximum amount of the credit/receivable is CZK 50,000,000
• The exporter (unless a foreign company) is an exporter meeting the definition set out in Act No. 58/1995
• 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 – rules you can find here,
• 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)