Why an exporter needs insurance

When working with a foreign buyer, an exporter takes on more risk than in the domestic market. The buyer may fail to pay or go bankrupt, and the buyer's country may impose currency restrictions, a payment moratorium or a ban on performing the contract. The bank financing the deal assesses the same risks and requires security. Export credit insurance makes it possible to transfer part of these risks to an insurer.

Who insures exports in Russia

The key player is JSC Russian Agency for Export Credit and Investment Insurance (EXIAR). It is a state export credit agency established in 2011. It is part of the Russian Export Center (REC) group, which belongs to the VEB.RF group. The REC group also includes Roseximbank, which finances exporters.

Export and trade credits are also insured by commercial insurance companies. But a state agency can accept risks the private market usually does not — above all, political risks in difficult countries and long credit terms.

Work with an export risk insurer is usually arranged directly or through the exporter's bank: the insurer assesses the buyer and the country and sets a liability limit and the share of cover. As a rule, part of the risk remains with the policyholder — this keeps them interested in checking the counterparty thoroughly.

Which risks are covered

Commercial

  • non-payment or late payment by the buyer;
  • bankruptcy of the buyer;
  • default by the buyer's bank — depending on the product.

Political

  • a ban on or restriction of currency transfers;
  • a payment moratorium imposed by the authorities of the buyer's country;
  • war, civil unrest, expropriation;
  • decisions of foreign authorities that make performance of the contract impossible.

Main products

  • Supplier credit insurance — protects an exporter shipping goods on deferred payment terms.
  • Buyer credit insurance — protects a bank lending to a foreign buyer of Russian products.
  • Short-term receivables insurance — cover for a portfolio of supplies to several buyers.
  • Insurance of confirmed letters of credit, export factoring and working capital loans — for banks serving exporters.
  • Guarantee insurance — helps an exporter obtain a bank guarantee for a foreign customer.
  • Insurance of Russian investments abroad against political risks.

How bank guarantee insurance works

Foreign customers, especially in construction and engineering projects, often require a bank guarantee from the supplier: an advance payment guarantee, a tender (bid) guarantee or a performance guarantee. The bank issues it against security — often a cash deposit or the exporter's credit limit. When the bank's risk under the guarantee is insured, it is easier for the bank to decide, and the exporter does not need to freeze its own money: the credit line remains available for production.

This scheme is especially useful for companies carrying out construction and installation work abroad or taking part in international tenders, but it applies in other industries too — from food to chemicals.

How to prepare for a deal

  1. Decide which risk you need to cover: buyer non-payment, political risk, guarantee risk.
  2. Gather information on the buyer: registration data, financial statements, payment history.
  3. Discuss the structure with your bank — many products are arranged together with financing.
  4. Build the cost of insurance into the contract price: the premium depends on the country, the term and the buyer's creditworthiness.
  5. Study your obligations under the policy: deadlines for notifying a payment delay, debt collection actions, currency clauses.

If the buyer is late with payment, act strictly according to the policy rules: notify the insurer on time, do not change the contract terms without agreement and pursue collection. Breaching these obligations may reduce the payout or lead to a refusal.

What else an exporter should insure

Credit risk is not the only one. Goods need protection in transit, and the business needs protection against property losses and third-party claims. Suitable options are cargo insurance, commercial property insurance and general liability insurance. All programmes for companies are collected in the For business section, and Polis Re specialists will help you put together comprehensive protection.