Mitigate Export Political Risks with Our Insurance Solutions
(Outside Of Australia & New Zealand)
Are you an exporter? Are some of the destinations that you export to subject to different types of risks? At Niche Trade Credit we can ensure that you have the right export credit insurance and/or political risk insurance to suit your individual business requirements.
This insurance is especially necessary when an international client prefers to trade on an Open Account or Documentary Collection basis, rather than the standard Letter of Credit.
As a business, it’s important to limit your financial risks; at Niche Trade Credit, we can help you to protect your business for complete peace of mind.
What is export credit insurance?
Essentially another form of credit risk insurance, it is designed for businesses that export their products or services to companies overseas.
Just as standard trade credit insurance protects companies against any losses incurred via bad credit, this type of insurance essentially covers you when you fail to receive payment for the goods/services you’ve exported. Imagine sending a large shipment of goods overseas, only to never receive payment – best case scenario it’ll be stressful, worst case scenario it could place your business’s financial position in jeopardy.
There are many reasons why you may encounter bad debt when exporting; however there is no need to be alarmed. Most risks can be covered by insurance!
What is political risk?
Developing markets provide a wide range of opportunities for businesses involved in export, yet it’s important to remember that there are also risks involved. In many cases there may be political risks that are beyond the control of your business, and therefore it makes sense to take out insurance.
Political risks include war, civil strife and coups, restrictions on the conversion and transfer of local currency earnings, and also government interference regarding contracts.
If you’re planning to export your products or services, be sure to familiarise yourself with political risk first and consider insurance coverage.
What can these insurance types cover?
When you are exporting to foreign shores there are so many different factors that you have absolutely no control over. As a business, it’s important to limit your risks where possible; this is where the insurance that we can source for you comes in handy.
So what exactly can our insurance options cover?
Enquire today on how we can help your business with Political Risk & Export Credit Insurance!
There are many situations where this type of insurance can come in handy, such as:
Contract repudiation
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A rejection of the goods by the buyer when they are delivered
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Non payment or insolvency and considering the fast changing economy that we are in this can be a very real risk
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If import or export licenses are suspended or cancelled
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If a Government organisation defaults on payment
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If a foreign Government chooses to cancel the contract with the buyer
Offering a comprehensive insurance brokerage service, Niche Trade Credit Insurance also offers full protection for export clients. When an overseas buyer doesn’t want to use a Letter of Credit and prefers to trade on an Open Account or Documentary Collection basis, export credit insurance cover becomes a necessity. If you want to safeguard your business from political and/or export risk, give us a call and one of our expert staff can design the ideal policy for your business.
Enquire today on how we can help your business with political risk and export credit insurance.
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Do I Really Need Export & Political Risk Insurance?
If you do a lot of business in emerging markets and you are not protected by a credit and political risk policy, you are putting yourself at risk. With a traditional trade credit insurance policy, you may have no recourse if your business is interrupted by political instability – such as a failure of financial institutions or political violence.
The benefits of political risk credit insurance include peace of mind, a guarantee that your cash flow will not be interrupted by political events, and the ability to expand your business into a larger number of still-developing nations, without taking on excessive financial risk.
In general, we recommend that every company – even those working in more developed nations – invest in political risk and export insurance, particularly if the financial loss caused by a single non-payment could be enough to seriously disrupt your business.
How Can I Mitigate The Risks Of Working With Buyers In Developing Countries?
Obviously, your specific risk factors and non payment risks will depend on the markets where you do business. If you work with established countries which have Export Credit Agencies (ECAS), like the United States, for example, you have a lower risk of an invoice going unpaid due to political issues – because the risk of political and social upheaval is lower.
Similarly, your risks are lower if you work with multinational corporations – because political upheaval or instability in a single country is less likely to disrupt their entire business for a long period of time.
In contrast, however, if you do a lot of business in African nations or in other developing countries in Asia, your risk may be higher. The same is true if you work with a company that only operates in a single country – a single political incident could completely destroy the company, or render them insolvent.
Beyond purchasing a trade credit insurance policy and an export & political risk insurance policy, you can further protect yourself by doing your due diligence when working with a new company. Simply asking for a credit report is a good way to determine if a potential buyer is going to pay on time – and financial statements and other such documents can be used to help determine the trustworthiness of a new partner company.
In addition, you can also ask your customers to trade on an Open Account basis – paying for your items before they are sent and delivered. Documentary Collection or Letters of Credit are also an option.
However, even with these methods of protection, you could still be at risk if a serious political event occurs in one of the countries to which you’re exporting your goods – so political risk insurance is still necessary.
frequently asked questions
Political Risk is cover against sales to overseas clients who cannot pay due to Currency Inconvertibility, Cancellation of an Import licence into a country where goods have been sent or Contract Frustration. Political Risk also covers Public Buyer default ie contracts with overseas Governments.