Trade Credit

1
Trade Credit Political Risk Insurance

• Product Market Overview
• Massachusetts Export Center Export Expo
• December 10, 2013

2
What is Trade Credit Political Risk Insurance?

• A risk mitigation product that protects a company
  selling on open account terms against losses due
  to non-payment and/or delayed payment (protracted
  default).
• Trade credit political risk insurance policies
  indemnify policyholders for the gross invoice
  value of goods or services unpaid due to
  commercial and/or political risks.

3
What are the Insured Risks?

• Trade credit political risk insurance policies
  protect sellers against the risk of non-payment
  by both private and government-owned obligors due
  to
• Commercial Risks
• Bankruptcy or insolvency
• Delayed payment/protracted default
• Political Risks
• Any hostile action by a foreign government that
  impedes the obligors ability to pay.
• Confiscation, expropriation, nationalization,
  cancellation of export/import licenses, seizure
  of goods, embargoes, repudiation of foreign
  obligations, etc.
• Currency inconvertibility and transfer risk.
• Political violence (terrorism, war, civil strife,
  insurrection, etc.).

4
The Market Two Main Policy Types

• Excess of Loss
• Underwriters focus their analysis on
  understanding and evaluating the applicants
  credit and collections procedures.
• Based on the underwriters analysis, policy will
  provide a discretionary credit limit, which
  allows insured to establish their own credit
  limits on certain buyers, subject to conditions.
• All limits are non-cancellable.
• Ground Up
• Underwriters focus on buyer creditworthiness and
  establish a credit limit for all or most of the
  insureds customers.
• Limits are often cancellable.

5
The Market Who are the Players?

• Excess of Loss
• Ace (SP AA-)
• AIG (SP A)
• Axis (SP A)
• Catlin (SP A)
• FCIA (SP A)
• Houston Casualty (SP AA)
• Ironshore (AM A-)
• LAU (SP A)
• Ground Up
• Atradius (Moodys A3)
• Coface (Fitch AA-)
• Euler Hermes (SP AA-)
• Lloyds of London Syndicates (SP A)
• OPIC
• QBE (SP A)

6
What are the Benefits?

• Sales Expansion
• Offer more competitive sales terms.
• Increase export sales by entering new foreign
  markets.
• Increase sales volume to existing customers.
• Risk Management
• Mitigate accounts receivable concentration risk.
• Protect accounts receivable and avoid
  catastrophic losses.
• May enable reduction in bad debt reserve.
• Attractive Financing
• Insuring receivables may allow for more favorable
  lending terms.
• May facilitate off-balance sheet financing though
  selling of accounts receivable.

7
Unmatched Experience, Service Expertise