EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
WELCOME
TO A PRESENTATION ON
INSURANCE & RISK MANAGEMENT
and
ROLE OF ECGC
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on exports.
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the the
therisks.
risks.
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
ECGC Mission
To support the Indian export
industry by providing cost effective
insurance and trade related
services to meet the needs of the
Indian exporters
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on exports.
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
OBJECTIVE of ECGC
To PROMOTE EXPORTS Mainly by
• Protecting Exporters against
COMMERCIAL & POLITICAL RISKS In
realising export proceeds
• Protecting Banks against
RISK OF DEFAULT in export credit
• Protecting Investors against POLITICAL
RISKS in Shareholders’ equity and loan In
overseas investments
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on exports.
on exports.
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the the
therisks.
risks.
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
ECGC Fact sheet
• Established in 1957
• Fully owned by GOI
• Under administrative control of MOCI
• Capital Base
• Highest ICRA rating of IAAA
• 5 Regional Offices and 51 Branch Offices
• All Branches ISO 9001:2000 certified
• Member of Berne Union
• MOU with GOI
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therisks.
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Key Performance Highlights
Financial Years
( Audited Data)
Sr.
No.
Description
1
Gross Premium
income
Rs.885.47 cr.
1004.80 cr.
2
Claims Paid
Rs.620.53 cr.
712.96 cr.
3
Recoveries
Received
Rs.136.07 cr.
168.69 cr.
2010-11
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2011-12
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
What is Risk?
Uncertainty about future outcome due to :
Unexpected occurrence of events
– Uncontrollable factors
– Lack of Information
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therisks.
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Risk Perceptions
•
•
•
•
•
•
Industry risk
Business risk
Risk of contract frustration
Risk of physical damage
Credit risk
Country Risk
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therisks.
risks.
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
What is Credit Risk
• Definition: The potential that a debtor will fail to
meet its payment obligations in accordance with
agreed terms.
• Export credit risk:
a) Buyer related problems
b) Country related
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therisks.
risks.
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Risk Management
Analysis, acceptance or mitigation
• Risk avoidance
• Risk Transfer
• Risk Sharing
• Risk retention
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
RISK MANAGEMENT IN EXPORTS
Goods
Receivables
Loss or
Damage
Marine
Insurance
Exchange
Risk
Hedging by
Authorized
Dealers
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therisks.
risks.
PAYMENT RISK
CREDIT
INSURANCE
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Payment Risks
Payment Risks
POLITICAL RISK
COUNTRY
COMMERCIAL RISK
BUYER
LC / NON – LC
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BANK
LC
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Role of ECGC as an Export Credit
Insurer
• Providing export credit insurance covers to
Exporters
against loss in export of goods & services under
ST & MLT (POLICY Scheme)
• Providing export credit insurance covers to
Banks & FI’s
to enable exporters obtain better facilities from
them (ECIB) (formerly known as Guarantees)
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therisks.
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Risks covered -Political
War, Civil
war, Internal
disturbances
Diversion of
voyage due
to war
exchange
transfer
blockages
/delay
New import
restrictions,
cancellation of
import licence,
etc.
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therisks.
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Risks covered- Commercial
Insolvency of
buyer/bank
Non
acceptance
of exported
shipment
Default of
buyer/bank
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on exports.
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therisks.
risks.
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Risks NOT considered Credit risk
• Non fulfillment of contractual obligations by exporter
including quality dispute.
• Default or insolvency or any omission /commission of any
agent of exporter/ buyer
• Failure of buyer to obtain necessary approvals for
imports
• Causes inherent in nature of goods
• Exchange fluctuation risks
• Physical loss/damage to goods
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Principles of Credit Insurance
• Good Faith
• Co-insurance
• Spread of risks
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Buyer & Country Underwriting
• The 2 pillars of Export Credit Insurance :
Country
Underwriting
Buyer
Underwriting
that assesses
buyer risks
and
Limit fixed on Buyer
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therisks.
risks.
that assesses
country risks
Country classification
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Products offered to Exporters
Declaration Based Policies
Whole Turnover
Specific transaction
1) Standard (SCR) Policy
2) Small Exporters Policy
3) Export Turnover Policy
1) Specific Shipment Policy
2) Specific Buyer Policy
3) Transfer Guarantee (for Banks)
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Products offered to Exporters
Exposure Based Policies
1) Single Buyer Exposure Policy
2) Multi buyer Exposure Policy
3) SME Policy
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Products offered to Exporters
Consignment Based Policies
1) Consignment Export Policy
2) Global Entity Policy
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Products offered to Exporters
Covers for IT/ITES industry
1) Software project exports policy
2) IT enabled (single customer) policy
3) IT enabled (multi customer) policy
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Premium Structure Basis
• Country Grouping - 7 fold (237 countries)
( A1, A2, B1, B2,….. D)- Higher the country
group, lower the premum rates
• Terms of Payment- More superior the payment
terms, lower the premium rate
• Specific approval required for Restricted Cover
countries
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Shipments (Comprehensive Risks) Policy
• Whole Turnover principle
• Selective options for exclusionLC/ Associates/ Consignments
• 90% cover
• Minimum premium of Rs.10,000/• Policy Period - 2 years
• Buyer wise Credit limit
• Discretionary limit
• Monthly declarations with premium
• No Claim Bonus – yearly 5%; max 50%
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Small Exporters Policy
•
•
•
•
Turnover not exceeding Rs.50 Lakhs p.a.
Minimum Premium Rs.2000/Policy Period - one year
Higher percentage of coverCommercial risks 95%;
Political risks 100%
• No Claim bonus
• Quarterly Declarations
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Specific Shipment Policy (SSP)
•
•
•
•
•
•
Covering one shipment or One contract
Processing fee of Rs.1000/80% cover
Premium higher than standard premium rates
Upfront premium before issue of Policy
Commercial / Political risks and L/C
comprehensive risks covered
• Submission of Shipment Statement and
realisation report
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
SME POLICY
• For exporters with Export Turnover not
exceeding Rs10 Lakhs and registered under
MSME Act, 2006
• Cover available upto Rs10 lakhs.
• Annual premium Rs 5,000 and processing
fee of Rs1,000
• 90% cover
• Maximum claim payable is Rs3 lakhs on any
buyer
• No requirement of monthly declaration of
shipments
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Benefits For Exporters
• Protection for account receivable
• Reduction in Bad debt
• Improvement in quality of financial planning
• Enhancement in risk taking capacity
• Easy access to bank finance on liberal terms
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
ECIB’S TO BANKS
• Contract of insurance between bank & ECGC
• Protects banks against losses in export credit
due to
- Insolvency of exporter
- Protracted default of exporter
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
Benefits For Banks
• Protection For Pecuniary Liabilities Against
Funded and Non Funded Credit Facilities To
Exporters
• Enables To Waive Collateral Securities
• Lesser Capital Deployment requirement.
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EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
In the Service of Exporters and
Banks since 1957
Thank You
Please visit us at: www.ecgc.in
: kolkata@ecgc.in;ero@ecgc.in
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on exports.
on exports.
We cover
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the the
therisks.
risks.