Yves Windelincx CEO y.windelincx@ondd.be

1. ONDD-groupfrom public to privatefrom Belgian to globalfrom monopolistic position to full competition Yves WindelincxCEOy.windelincx@ondd.be Conference on the future of credit insurancePrague, 13 September 2007

2. Content • Historical role of ONDD as export promotion instrument • Changing role of ONDD • ONDD as market player Yves Windelincx

3. ONDD as export promotion instrument • What? Federal instrument of foreign trade with strong autonomy. • Mission : supporting national companies in their international trade business (mostly export transactions). • How to support : ONDD takes over some risks related to trade transactions. • Most important risks : • non payment risk on customer (= credit risk) → name credit insurance • non-transfer risk of payment made by customer Yves Windelincx

4. Where? • mostly in developing countries (with lack of developed financial market). • covering those trade transactions which are not desired by the private credit insurance market (e.g. too long credit tenor, dimension of the transaction, quality of the import country). • consequently, the traditional role of ONDD was one of a credit insurer of last resort (when no one else is still prepared to take the risk). Yves Windelincx

5. Changing role of ONDD • Structural change in the emerging markets leads to a decline role of ONDD and other public export credit agencies.Countries tend to graduate and perform better due to the efforts of the International Monetory Fund (IMF) to promote financial stability and broad-based economic growth. Traditional market of public export credit agencies is shrinking. Reasons for changes in the historical role and strategy of ONDD : Yves Windelincx

6. Restrictions imposed by European Commission and OECD to public export credit agencies with a view to avoid unfair competition with state aid to private sector.As such, banning by European Commission of cover provided by public credit insurers for marketable risks.Marketable risks : cover for ST standard trade transactions on EU/OECD countries forbidden for public export credit agencies. • Restraining distortion of competition via subsidiation through export credit insurance (e.a. lower premiums, offering lower interest rates than market rates for export credits guaranteed by ONDD).Free market competition must prevail. Yves Windelincx

7. Delocalization of manufacturing industry reducing the volume of export transactions from Belgium.Less transactions to cover by ONDD. • Sourcing of projectsHeadquarters of multinationals decide on what transactions to be implemented by (Belgian) subsidiaries (decision making power out of hands of national corporations). • Increasing role of the private credit insurance sectorUpgrading of emerging countries increases the area in which private insurers are now willing to take on risks in these markets – not only in EU and OECD countries, but in growing emerging markets as well. Yves Windelincx

8. Conclusion • choice for public export credit agency is to remain insurer of last resort or to become a more global market player(1). • insurer of last resort will have a marginal though well protected role to play • or • insurer as global market player will continue to play its public role (export promotion), but conducting its business on the basis of commercial practices (free market principles) within the guidelines imposed by European Commission. • ONDD is evolving to the latter type. • (1) See also paper R. Ascari, Is Export Credit Agency a misnomer?, Febr. 2007 Yves Windelincx

9. How to realize this private player approach? ONDD as market player • 1. by seeking for international expansion via strategic partnerships (= between ONDD and SACE) • Pooling of : • data system / data transmission / technology • underwriting capacity • Different forms of partnerships : • equity participations • cooperation agreements • representation agreements Yves Windelincx

10. Equity participations • Garant (50 %) Swiss/Austrian credit insurer • reinsurance capacity • representation • access to Russian market • TCRe (25 %) Belgian credit insurer • enlargement of product (XOL policies) • KUP (66 % together with Sace BT) • take-over • public bidding • → access to Central and Eastern Europe • → this in the context of a global strategy of international expansion Yves Windelincx

11. International expansion • KUP is the first common acquisition ofDucroire | Delcredere plc and Sace BT. • KUP is the first step on a new path thatDucroire | Delcredere plc and Sace BT have decided to explore together. • Aim : be present in major economic zones worldwide and where growth potential is possibly higher than in Europe. • Means : First steps together with Sace to share costs, increase databases, develop IT systems, enjoy synergies. • Philosophy : Attract other partners through a decentralized federative structure where each partner enjoys a certain autonomy and can be used as a platform for the larger region. Yves Windelincx

12. Cooperation agreements • Ingosstrakh Russia Reinsurance • Sinosure China Reinsurance • ECGC India Reinsurance • Aurea Brazil Reinsurance • seeking for cooperation with other private and public credit insurers, e.g. in Turkey • Representation agreement • UK (branch) – Andrew Strong Yves Windelincx

13. 2. by setting up a private corporation • Ducroire | Delcredere plc (end 2004), disposing of free provision of services all over the European Union • cover of short term standard trade transactions in industrialized countries (EU + OECD) and emerging countries • consumption goods • commodities • semi-manufactured goods • equipment Yves Windelincx

14. Splitting-up of activities between ONDD &Ducroire | Delcredere plc • Ducroire | Delcredere plc : • ST standard trade transactions • ONDD (public) : • Medium & long term trade transactions • ST special trade transactions (dredging works, infrastructure, …) • Evolution of insured amounts ONDD-group after creation private company (see next table) Yves Windelincx

15. Evolution of insured amounts ONDD-group (in millions EUR) After setting up Ducroire | Delcredere plc, ONDD-group can present higher insured amounts for the different types of activities, including the traditional ONDD-activity rising to 27 % of insured amounts at end 2006 against 16 % only at end 2003. Yves Windelincx

16. 3. by widening the access to credit insurance for more corporations • How? • lowering the national content requirement by accepting a higher degree of foreign deliveries / services in the transactions to be covered. • supporting the expansion of Belgian mother corporations by accepting cover for the export transactions of their subsidiaries abroad. • granting insurance capacity to multinationals of Belgian corporations in exchange for creating added value in Belgium by holding company (e.a. R&D, production, commercial activities, center of competence, …). Yves Windelincx

17. supporting deals of international project sponsors, in return for creation of added value in Belgium (for exemple the setting up of a Belgian subsidiary) or by insisting on a Belgian participation in the transactions to be covered. • supporting market window activity • activity without Belgian interest, but at market conditions and reinsured by private reinsurers • especially unfunded risk participations in syndicated bank loans and participations in insurance syndicates for international trade-related transactions Now ONDD is showing more flexibility in taking transactions. Yves Windelincx

18. Conclusion • Non-marketable trade transactions will always exist, e.g. geo-political situation in the Middle East and Iran is important risk factor, refraining private credit insurers from acting. • Hence, public ECA’s, like ONDD, have vital role to play : supporting the Belgian companies in their international development. • Condition to this vital public role : maintaining a critical mass of business (no marginal activity). • Therefore, broadening the scope of activities by : • commercial approach, introduce market principles • concluding partnerships • greater flexibility on national content issues • developing the right set of new products • strengthening capital structure (see next chart) Yves Windelincx

19. ONDD is an autonomous public corporation not relying on the state budget • To finance the further expansion of its activities and the strategic investment needs, ONDD has strenghtened its capital base via multiple capital increases, based on own financial means 125 200 155 150 Yves Windelincx

20. Thank you for your attention