Export Credit Insurance: Because Nothing in this World is Sure

It's still so clear in your head. You remember the day you had the greatest fall in your life. A few years ago, a hotel in Baghdad contacted you and ordered a big bulk of native bedsheets. It was the most glorious day in your life. You were so sure that it was a great business opportunity for you. You trusted the company and there was even a contract-signing. You spent months producing those precious bedsheets and spent so much money on raw materials and labor. You thought there was no risk because there was a sure customer. What you did not expect that while your products were on their way to Iraq, a war sparked in the capital city. Until now, you wonder what could have happened to the bedsheets you emptied your pockets on.

You wouldn't be crying for many years now had you only applied for export credit insurance. It is a kind of business insurance that protects exporters from any potential political or commercial risks. Commercial risks include bankruptcy of the importer, goods rejected from importers and payment defaults by importers. Political risks include import quotas, transfer restrictions, import permit revocations and wars. Export Credit Insurance benefits both the banks and the exporters.

Export credit insurance provides a feeling of security to exporters regarding payment risks. It also encourages exporters to enter markets in other countries. It also allows them to accept or offer terms of payment they want. It may include Open Account, Documents Against Payment and Documents Against Acceptance. Exporters can also accept market demands coming from importers in countries with higher risks. They can also use export credit insurance in acquiring discount bill financing where it becomes extra collateral for the banks.

Export credit insurance eases banks that provide financing for post-shipment exports. It is done through the discount export bill belonging to the exporters. It also allows banks obtaining insurance acceptance from exporters to get added value for the exporters' discounted bills.

Had you known about export credit insurance, you would have applied for it for sure. You would have enjoyed the mentioned benefits. But it's too late now. Maybe one day, the ship carrying your bedsheets will dock on the shore near you and find you but that's highly unlikely.