Exportkreditgarantien des Bundes

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Times of Change for ECAs Dr. Hans JanusThe
Future of Credit Insurance ConferencePrague, 13
September 2007

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Traditional Raisons dêtre for ECAs

• Insurer of last resort reacting to market
  failures
• Export support Principle of subsidiarity
• Jobs through exports, national content (made
  in)
• creating/maintaining level playing field between
  ECAs
• political / strategic objectives (e.g. energy
  supply security, raw materials supply, support
  for strategic industries)
• New and controversial
• Market-oriented business objectives
• national benefit (made by)
• Good-bye to subsidiarity principle?

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Challenges of Globalization

• From Insurers of last resort to quasi market
  players?
• Are concepts like market failure / subsidiarity
  still relevant?
• Are there clear cut market segments for private
  market players and state account ECAs? Are
  boundaries blurring?
• Co-operation with private players or market exit?
• How should state account ECAs react to
  Globalisation?

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A new environment for ECAs

• All ECAs are breaking-even
• Business philosophy changes from support for
  national exports to a much more commercial
  approach
• ECAs have to adapt to globalisation of sourcing,
  procurement and value chains
• More competition between ECAs and private market
  players (Private Credit Insurers, Banks,
  Reinsurers) due to liquidity in the markets and
  risk appetite
• OECD / WTO and EU-Regulations not binding for
  Non-Members and private market players
• Can ECAs follow these market changes? Should
  they?

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Following the global value chain- Made in
Germany or made by Siemens
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Private Credit Insurers approaching

• Growing appetite for MLT Business
• From selective offers to a regular product
• Interest of Brokers and capacity of Reinsurers
  growing
• Repayment terms up to 5 years including political
  risk
• Cover for markets ranked in OECD-categories 0-4
  exceptions for categories 5-7 possible
• No restrictions by OECD Arrangement, National
  Content, Local Costs etc.

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ECAs caught in a trap?

• Competitive disadvantage for OECD-ECAs compared
  to Non-Members through self imposed restrictions
  Foreign Content, Local Costs, constraints in OECD
  High Income Countries
• Private Insurers activities in MLT Business
• DG Competition of EU increasingly focusses on MLT
  business
• Can ECAs comply with WTO Requirement to
  break-even when losing the low-risk business?
• Diversification of ECA approaches jeopardizes
  level playing field

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Avenues for future positioning (the EH Germany
view)

• No exclusive territories but openness for
  co-operation
• Complementing the private market
• Advanced Risk Mitigation Approaches
• ECA Reinsurance
• Private Market Reinsurance
• Portfolio Swaps between ECAs
• Joint Insurance with Private Credit Insurers
• National Benefit rather than National Content

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Re-Inventing an ECA The EH Germany approach (1)

• Complete re-structuring of internal organisation
  (fully integrated with consortium partner
  PricewaterhouseCoopers)
• New concept for sales organisation
• Marketing activities intensified
• Customer orientation further improved
• New IT-Solutions under development
• Significant cost reductions realised

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Re-Inventing an ECA The EH Germany approach (2)

• Export Credit and Investment Insurance under one
  roof
• Focus sharpened on Strategy, Sustainability,
  Product Development, Marketing, Standards and
  Quality
• Gradual shift from cash-flow to accruals
  accounting
• High importance of breaking-even requirement, but
  no profit objectives
• clear commitment to offer short term
  non-marketable risk cover
• New products developed and successfully
  introduced
• Whole turnover policies modernised
• Bond cover for fair and unfair calling
• New Premium System for Private Buyer Risks

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Re-Inventing an ECA The EH Germany approach (3)

• Future positioning, future strategy
• EH remains state export promotion instrument
• Proven National benefit remains indispensable,
  but acceptance of lower national content as
  consequence of global value chains currently
  under consideration
• Further increase of cooperation with other ECAs
  but also with private market players
• one of the leading ECAs of the world in regard of
  product development, inventiveness, customer
  focused solutions

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Thank you very much for your attention!

• Further information is provided under
• www.agaportal.de
• www.exportkreditgarantien.de

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Back-up Charts

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From budget integration to financial autonomy-
totally different approaches
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Average OECD country risk grading for EH
Top-20-markets