WELCOME TO A PRESENTATION ON INSURANCE & RISK MANAGEMENT and ROLE OF ECGC

1. WELCOME TO A PRESENTATION ON INSURANCE & RISK MANAGEMENT and ROLE OF ECGC

2. ECGC Mission • To support the Indian exportindustry by providing cost effectiveinsurance and trade related services to meet the needs of the Indian exporters

3. 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

4. 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 ECGC Fact sheet

5. Key Performance Highlights

6. Uncertainty about future outcome due to : Unexpected occurrence of events Uncontrollable factors Lack of Information What is Risk?

7. Risk Perceptions Industry risk Business risk Risk of contract frustration Risk of physical damage Credit risk Country Risk

8. 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

9. Risk Management Analysis, acceptance or mitigation Risk avoidance Risk Transfer Risk Sharing Risk retention

10. RISK MANAGEMENT IN EXPORTS Goods Receivables Loss or Damage Exchange Risk PAYMENT RISK Hedging by Authorized Dealers CREDIT INSURANCE Marine Insurance

11. Payment Risks Payment Risks POLITICAL RISK COMMERCIAL RISK COUNTRY BUYER BANK LC / NON –LC LC

12. Providing export credit insurance covers to Exporters against loss in export of goods & services under ST & MLT (POLICY Scheme) Providing export creditinsurance covers to Banks & FI’s to enable exporters obtain better facilities from them (ECIB) (formerly known as Guarantees) Role of ECGC as an Export Credit Insurer

13. 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.

14. Risks covered- Commercial Insolvency of buyer/bank Non acceptance of exported shipment Default of buyer/bank

15. 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 Risks NOT considered Credit risk

16. Principles of Credit Insurance Good Faith Co-insurance Spread of risks

17. The 2 pillars of Export Credit Insurance : and Buyer & Country Underwriting Country Underwritingthat assesses country risks Country classification Buyer Underwritingthat assesses buyer risks Limit fixed on Buyer

18. Declaration Based Policies Products offered to Exporters Whole Turnover 1) Standard (SCR) Policy 2) Small Exporters Policy 3) Export Turnover Policy Specific transaction 1) Specific Shipment Policy 2) Specific Buyer Policy 3) Transfer Guarantee (for Banks)

19. Exposure Based Policies Products offered to Exporters • Single Buyer Exposure Policy • 2) Multi buyer Exposure Policy • 3) SME Policy

20. Consignment Based Policies Products offered to Exporters 1) Consignment Export Policy 2) Global Entity Policy

21. Covers for IT/ITES industry Products offered to Exporters 1) Software project exports policy 2) IT enabled (single customer) policy 3) IT enabled (multi customer) policy

22. 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

23. Whole Turnover principle Selective options for exclusion- LC/ 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% Shipments (Comprehensive Risks) Policy

24. Small Exporters Policy Turnover not exceeding Rs.50 Lakhs p.a. Minimum Premium Rs.2000/- Policy Period - one year Higher percentage of cover- Commercial risks 95%; Political risks 100% No Claim bonus Quarterly Declarations

25. 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

26. 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

27. 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

28. 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

29. 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.

30. In the Service of Exporters and Banks since 1957 Thank You Please visit us at: www.ecgc.in : kolkata@ecgc.in;ero@ecgc.in