Credit Insurance Aaaaa

7/30/2019 Credit Insurance Aaaaa

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Export Credit Insurancefor

Managing risk,Improve Financing

Facilitating Trade

Kathy Edwards

Global Business Solutions Corp.


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What is Credit Insurance?Insurance against non-payment ofaccounts receivable

Protection of a major asset on yourbalance sheet

Collateral

Sleep Insurance


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What it is NotA means to make a bad credit good

Primary source of repayment


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Advantages of Credit Insurance

Protection Against Bad Debt Loss

Increased Sales

Better Borrowing Position with Insured Receivables

Credit Information Resource

Collection Services

Factoring


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Types of CoverageCommercial Risks

Buyer goes bankrupt

Death

Default of payment for any reason other than productdispute

Political Risk Transfer riskGovernment preventing release of funds

war/revolution

currency inconvertibility

loss of import/export license (Contract Frustration)


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Catagories of InsurersPublic Underwriters

Private Underwriters


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Public UnderwritersExport-Import Bank of the United States

Defined programs and costs

Subject to US Government policiesSmall business policies

Short term, medium term, long term

Single buyer or multi-buyer

Pay as you go to improve cash flow

Export Credit Agencies (ECAs)OECD guidelines

Insurance builds customer loyalty


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Underwriting PhilosophiesExporter

Length of time in business

Financial informationCredit approval experience

Losses

Underwriting BuyersTrade References

Credit reports D&B International

Coface

Graydon

Financial information


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Private Insurance Market

Export & Domestic CoverageAIG

Coface (f/k/a CNA)Euler Hermes ACI (f/k/a Euler ACI)

Altradius Trade Credit Insurance (f/k/a

Gerling NCM Credit Insurance)FCIA


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Private UnderwritersLess stringent underwriting of exporter

Greater exporter responsibility for creditevaluation of buyer

Deficient exporter credit files may resultin refusal of claim payment

Minimum premium payable up frontLower rates but greater possibility ofpurchasing unnecessary coverage


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$27,000$29,400$30,000$33,000Estimated

Premium onsales of $6 Mil

.45%.49%.50%.55%Premium Rate

$100,000$0$150,000$20,000DiscretionaryCredit Limit -DCL

$40,000$0$50,000$0Annual

Deductible

95%90%90%90%Indemnity

$1.5 mil$3 mil$2 mil$1 milPolicy Limit

Quotes from Private Insurers


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Policy AssignmentBenefits of policy can be assigned to abank or lending institution

Immediate availability of funds

Pass cost of funds to importer

Claims will be paid directly to thelender


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Credit Insurance as a Sales AidOpen account sales

Better credit terms

Develop new markets

Less Creative sales terms from sales

staff


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Replace Letters of CreditLetters of Credit

L/Cs do NOT guarantee payment

L/Cs require expertise

L/C may cost the sale if a competitor offers open accountterms

L/Cs tie up buyers funds or credit facilities

Insurance eliminates high local interest costs

Insurance eliminate bank fees, amendment fees, and

discrepancy fees


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Final WordEvery asset on a balance sheet is insured

except accounts receivablewhich, in some cases, account for

50% of the assets of the business

Would that keep you awake at night?


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Dollars and Sense


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Sale to MexicoSale EXW $100,000

SHIPPING $5000.00

DAF(LARADO) $105,000

TERMS:SHIP 60 DAYS FROM REC OF IRR COMFLETTER OF CREDIT.


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BUYERS VIEWLOC $105,000

BANK FEE 5% $5,250

SUBTOTAL $110,250

COST OF $$ * $3,325LANDED COST $113,575

*I=prt. $105x19%/12x2=


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60 DAY OPEN ACCT WITH

INSURANCEEXWORKS $100,000

SHIPPING $5,000

DAF $105,000

CREDIT

INSURANCE* $1,000

FINANCE % $1,000LANDED COST $107,000

*premium at 1% for 60 days


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LOC PRICE $113,575

60 DAY OPEN

ACCOUNT $107,000

DIFFERENCEIN DELIVERED

PRICE $6,575


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IS YOU STUFF WORTH

$6575 MORE THAN YOUR

COMPETATORS

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