Page 83 - Export and Trade

Insurance

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therefore provide opportunities to restructure borrowings. • ‘Default of a Public Debtor’ including central, regional or
local government department or agency.
Thecreditinsurerwill usuallyprovide: • ‘Inconvertibility of currency’.
• An investigation of a buyer’s creditworthiness prior to
shipment of the goods traded. Insurance cover & premium
•Adviceandassistanceshouldalossoccur. When purchasing Trade Credit insurance, cover will typically
• Information pertaining to relative risks in different be provided up to 90 percent of the invoice value. This
foreign markets. means that clients usually retain approximately ten percent
•An‘earlywarningsignal’whereyourclientsexperience of the risk. Premium options are usually in the range of 0.25
deterioration in their creditworthiness. percent to 0.55 percent of insurable turnover depending of
the risk covered, indemnity level and excess selected.
Potential risks of trade When deciding on policy structure, the credit insurer
•‘Contract Repudiation’in respectoflossesarising from will require a reasonable spread of risk. The underwriter
there-saleofgoodswhich theoverseasdebtorhas will normally look at insuring the company’s entire book of
failed to accept, through no fault of the insured. business although it is possible to insure part of the ledger
•‘ContractCancellation’resultswhen anymeasure by mutual agreement with your insurer. It is usually more
or decision of the Government directly restricts a cost effective to insure the entire ledger and may even be
validimportorexportlicenseandthereforeprevents slightly more expensive to choose partial insurance.
IXO¿OPHQW RI WKH FRQWUDFW Some of the factors which will be taken into account in
•‘ContractFrustration’isthedirectpreventionofan deciding premium rates are the:
import or export licence due to the occurrence of civil • Buyer’s creditworthiness.
war, insurrection, rebellion and/or revolution in the •Buyer’stradinghistory.
country of the insured debtor. •Buyer’scountryoforigin.
• ‘Protracted Default’ occurs when every endeavour to •Levelof insurableturnover.
recover the debt has been made but without success, • Types of products and/or services transacted.

NZ Export & Trade Handbook 2018 81