The information provided here is part of Guide on howtoexport and import
Types of Insurance policies covered by Credit Guarantee Insurance Companies
In this article, I am going to explain about four types of risk cover policies of Insurance companies who covers the risks of overseas buyers. These categories could be varied from one service provider to another one. I mention these categories to let you know a brief idea about the credit risks covers. You may contact the service provider at your country to know accurate information about their service to cover credit risks under international business.
4 Categories of risk cover policies
In this article, I would like to explain about major 4 categories of risk Kindly note, this article is only an introduction about risk covering insurance companies and its functions in simple language to make you easily understand. You may contact official website of such credit guarantee companies to know more.
The main types of insurance covers are standard policies, specific policies, financial guarantee and special schemes.
Standard Policies: They are ideally suitable to exporters to cover payment risks involved in export on short- term credit basis.
Specific Policies: These policies are specifically designed to protect Indian exporters from the risks involved in Export on deferred payment contracts, Services rendered to foreign parties and Construction works and turnkey projects undertaken abroad.
Special policies, beside the risks covered under Standard policies, are issued to meet the specific requirements of export transactions.
Financial Guarantee: They are the policies issued to banks for covering risks in extending credit at pre-shipment as well as post shipment stages.
Special Schemes: They are meant to cover risks involved in confirmation to letter of credit opened by foreign banks, insurance cover of Buyers Credit, Line of Credit and exchange fluctuations risks.
In this article, we have discussed about different common categories of risks covered by various credit guarantee companies. Would you like to add more categories under risk cover policies offered by other agencies? Share your experience with credit risk covering service providers to let others aware.
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Comment below your thoughts about various types of credit risk covering polices under import export trade of international business.
4 Standard Policies under Export Credit Guarantee Corporation ECGC.
Now, we can discuss about 4 standard policies under Export Guarantee Corporation ECGC.
Standard Policies under ECGC
Standard Policies under ECGC has designed four types of standard policies for shipment made on short-term credit.
(a) Shipments (Comprehensive Risks) Policy: This covers from commercial political risks from the date of shipment.
(b) Shipments (Political Risks) : This covers from political risks from the date shipment.
(c) Contracts (Comprehensive Risks) Policy : This covers from commercial political risks from the date of contract.
(d) Contracts (Political Risks) Policy : This covers from political risks form the date of contract.
The Shipments (Comprehensive Risks) policy is the one ideally suitable for goods exported on short-term credit basis. This policy covers from commercial and political risks from the date of shipment. Risk of pre-shipment losses on account of frustration of contract are practically nil in respect of export of raw materials, consumer durable or consumer goods as they can be sold easily. Contract policies cover from the date of contract so they are ideally suitable in case goods are to be manufactured to meet the specific requirements of buyers and do not have alternative buyers. Further, the risk of ban on export of goods covered by the contract policy only.
In this article we have discussed about standard policies covered by ECGC to cover credit risks. I hope, you are enjoying reading articles about credit risks and solutions in international business. If you would like to share your experience in handling risks under import export business, you can add below. I personally request you to share your experience also in resolving risks under export import business of international trade.
Comment below your thoughts about standard policies of Export Credit Guarantee Corporation to cover credit risks of clients involve in export business.
The above information is a part of Online export import training guide
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