Traditional „Raisons d‘ être” for ECA’s

1. Exportkreditgarantien des Bundes Hermesdeckungen Times of Change for ECAs Dr. Hans JanusThe Future of Credit Insurance ConferencePrague, 13 September 2007

2. Exportkreditgarantien des Bundes Hermesdeckungen Traditional „Raisons d‘être” for ECA’s • Insurer of last resort reacting to market failures • Export support + Principle of subsidiarity • “Jobs through exports”, national content (“made in…”) • creating/maintaining level playing field between ECAs • political / strategic objectives (e.g. energy supply security, raw materials supply, support for strategic industries) New and controversial: • Market-oriented business objectives • national benefit (“made by…”) Good-bye to subsidiarity principle?

3. Exportkreditgarantien des Bundes Hermesdeckungen Challenges of Globalization • From Insurers of last resort to quasi market players? • Are concepts like market failure / subsidiarity still relevant? • Are there clear cut market segments for private market players and state account ECAs? Are boundaries blurring? • Co-operation with private players or market exit? • How should state account ECAs react to Globalisation?

4. Exportkreditgarantien des Bundes Hermesdeckungen A new environment for ECAs • All ECAs are breaking-even • Business philosophy changes from support for national exports to a much more commercial approach • ECAs have to adapt to globalisation of sourcing, procurement and value chains • More competition between ECAs and private market players (Private Credit Insurers, Banks, Reinsurers) due to liquidity in the markets and risk appetite • OECD / WTO and EU-Regulations not binding for Non-Members and private market players • Can ECAs follow these market changes? Should they?

5. Exportkreditgarantien des Bundes Hermesdeckungen Following the global value chain:- Made in Germany or made by Siemens

6. Exportkreditgarantien des Bundes Hermesdeckungen Private Credit Insurers approaching • Growing appetite for MLT Business • From selective offers to a regular product • Interest of Brokers and capacity of Reinsurers growing • Repayment terms up to 5 years including political risk • Cover for markets ranked in OECD-categories 0-4; exceptions for categories 5-7 possible • No restrictions by OECD Arrangement, National Content, Local Costs etc.

7. Exportkreditgarantien des Bundes Hermesdeckungen ECAs caught in a trap? • Competitive disadvantage for OECD-ECAs compared to Non-Members through self imposed restrictions: Foreign Content, Local Costs, constraints in OECD High Income Countries • Private Insurers’ activities in MLT Business • DG Competition of EU increasingly focusses on MLT business • Can ECAs comply with WTO Requirement to break-even when losing the low-risk business? • Diversification of ECA approaches jeopardizes level playing field

8. Exportkreditgarantien des Bundes Hermesdeckungen Avenues for future positioning (the EH Germany view) • No exclusive territories but openness for co-operation • Complementing the private market • Advanced Risk Mitigation Approaches: • ECA Reinsurance • Private Market Reinsurance • Portfolio Swaps between ECAs • Joint Insurance with Private Credit Insurers • National Benefit rather than National Content

9. Exportkreditgarantien des Bundes Hermesdeckungen Re-Inventing an ECA: The EH Germany approach (1) • Complete re-structuring of internal organisation (fully integrated with consortium partner PricewaterhouseCoopers) • New concept for sales organisation • Marketing activities intensified • Customer orientation further improved • New IT-Solutions under development • Significant cost reductions realised

10. Exportkreditgarantien des Bundes Hermesdeckungen Re-Inventing an ECA: The EH Germany approach (2) • Export Credit and Investment Insurance „under one roof“ • Focus sharpened on Strategy, Sustainability, Product Development, Marketing, Standards and Quality • Gradual shift from cash-flow to accruals accounting • High importance of breaking-even requirement, but no profit objectives • clear commitment to offer short term non-marketable risk cover • New products developed and successfully introduced • Whole turnover policies modernised • Bond cover for fair and unfair calling • New Premium System for Private Buyer Risks

11. Exportkreditgarantien des Bundes Hermesdeckungen Re-Inventing an ECA: The EH Germany approach (3) • Future positioning, future strategy: • EH remains state export promotion instrument • Proven National benefit remains indispensable, but acceptance of lower national content as consequence of global value chains currently under consideration • Further increase of cooperation with other ECAs but also with private market players • one of the leading ECAs of the world in regard of product development, inventiveness, customer focused solutions

12. Exportkreditgarantien des Bundes Hermesdeckungen Thank you very much for your attention! Further information is provided under www.agaportal.de www.exportkreditgarantien.de

13. Exportkreditgarantien des Bundes Hermesdeckungen Back-up Charts:

14. Exportkreditgarantien des Bundes Hermesdeckungen From budget integration to financial autonomy:- totally different approaches

15. Exportkreditgarantien des Bundes Hermesdeckungen Average OECD country risk grading for EH Top-20-markets