HKECIC Trade with Confidence Series: EP1 Export Credit Insurance 101

Export credit insurance provides protection against the risks of non-payment involved when offering credit terms to your overseas buyers. When your company is engaged in export trading on credit payment terms namely Documents against Payment (DP), Documents against Acceptance (DA) and Open Account (OA), it is exposed to "non-payment" risks. Unforeseeable political, social and commercial factors can also prevent payments from your buyers to your company. [1] 

Being insured by export credit insurance, your company is protected against "non-payment" risks, enabling you to secure business by extending more favorable terms to overseas buyers. Your capability in acquiring trade finance is also enhanced. Export credit insurance companies, such as the Hong Kong Export Credit Insurance Corporation (HKECIC) [2], offer export credit insurance to Hong Kong exporters, helping them to conduct their business more confidently. 

Major Benefits of Export Credit Insurance [3] 

1. Insurance Protection: Export credit insurance protects exporters against risks of non-payment involved when offering credit terms to their overseas buyers, enabling them to secure business by extending more favorable terms to overseas buyers. 

2. Risk Assessment and Monitoring: Generally the insurance policies provide exporters with risk assessment and monitoring support whereby it advises exporters on the prudent level of credit they may grant to their buyers. Export credit insurance companies maintain a worldwide database of buyers whose information is regularly updated from various sources including an international network of credit information agencies, and whose creditworthiness is regularly monitored by their underwriters. 

3. Collateral for Discounting Export Bills: Export credit insurance policies are generally accepted by the banking community as collateral for the discounting of export bills. Under this arrangement, the protection accorded to a policyholder is extended to the policyholder’s bank by a Letter of Authority, which authorises claims to be paid directly to the bank. Such an arrangement can be instrumental in helping policyholders obtain the banking facilities they need. 

4. Providing Assistance in Loss Minimisation: With an international network of lawyers and debt collectors available to call on, the insurers assist policyholders in solving payment problems and advises them on practical ways of minimising losses when they trade. 

This article is provided by the HKECIC. For more details about export credit insurance solutions, please contact the HKECIC at marketingunit@hkecic.com.  

References: 

[1] Hong Kong Export Credit Insurance Corporation - Export Credit Insurance
https://www.hkecic.com/en/export_credit_insurance  

[2] Hong Kong Export Credit Insurance Corporation - Corporate Background
https://www.hkecic.com/en/about   

[3] Hong Kong Export Credit Insurance Corporation - Major Benefits
https://www.hkecic.com/en/major_benefits  

About HKECIC
Established in 1966, the HKECIC is a statutory organisation under the Hong Kong Export Credit Insurance Corporation Ordinance (Chapter 1115). Its primary mission is to encourage and support export trade by offering insurance protection against non-payment risks that may arise from both commercial and political events. Its contingent liability under contracts of insurance is guaranteed by the Government of the Hong Kong Special Administrative Region, with the statutory maximum liability currently standing at $80 billion.