Credit insurance

Credit insurance insures an exporter against the following risks exporter against the risk of not being paid under an export contract or not being able to recover the costs of fulfilling this contract due to certain events that prevent its fulfillment or lead to its termination. Credit insurance can be provided by private insurance companies as well as by public export credit agencies be offered.

Credit insurance offered by government bodies and agencies
In Germany, the task of state export credit insurance is provided by Euler Hermes Aktiengesellschaft on behalf of and for the account of the Federal Republic of Germany. The German export credit guarantees are marketed under the name Hermes Cover known as Hermes Cover.

If the foreign customer is a private individual or a privately organized company, the German government provides cover in the form of an export guarantee. export guarantee . If, on the other hand, the customer is the state or a public corporation, the Federal Government provides cover in the form of an export guarantee. export guarantee . In principle, there is no lower limit above which cover is not possible.

Cover by the Federal Government
Hermes Cover can be granted if the criteria of eligibility and risk justifiability are met.

• The eligibility for promotion can - in addition to a general interest in exports - consist of job security, structural policy considerations or foreign policy objectives. Ecological, social and development policy aspects are increasingly being included in decisions.
• The justifiability in terms of risk means that there must be a reasonable prospect of a loss-free outcome. Whether and to what extent cover can be assumed depends on the specific resolution situation for the respective ordering country.

The decision for the cover of an export transaction is made by the so-called Interministerial Committee on Export Guarantees (IMC) . The IMC defines a risk-appropriate cover policy for each individual export country and thus determines scope and conditions for the respective cover options.

Export credit guarantees may only to German exporters or credit institutions that finance the business of German export companies.

Hermes Cover is only used in cases where the private sector does not provide suitable or sufficient cover. Consequently, the Federal Government's business focuses on export credit guarantees for developing and emerging countries . Hermes Cover helps to open up markets that are difficult to access and to maintain business relationships in difficult times.

Requirements and procedures for setting up new credit insurance

The German government has processing of applications for state export credit guarantees to Euler Hermes Aktiengesellschaft. These companies are authorized to make and receive important declarations on behalf of and for the account of the Federal Government. Euler Hermes Aktiengesellschaft is responsible for both companies.

Applications for manufacturing cover or export credit cover are submitted by the exporting companies, applications for buyer credit cover are handled by the financing house bank.

Digital applications
With " Hermes Cover click&cover EXPORT ", a product that allows exporting companies to efficiently and digitally conclude foreign transactions of up to five million euros with standardized supplier credit cover. An online application, including pre-check and fee indication, can be submitted via AGA portal can be submitted via the AGA portal.

"Hermes Cover click&cover EXPORT" is primarily suitable for standardized transactions with the following parameters, among others:

• Order value: maximum EUR 5 million
• Payment terms: only selected regular repayment profiles
• Maximum credit period: 5 years
• Countries in country categories 1 to 5
• Permissible foreign share: maximum 49 percent

• of which local costs: 11.5 percent of the total contract value.

Costs and excess

The costs for insuring your export business are made up of fees and charges.

• The fees are charged for the costs incurred and generally depend on the size of the transaction to be covered, i.e. the order value or loan amount. loan amount . This includes, for example, the application fee, which is charged once when you submit an application.
• Fees are generally based on the risk and make up the main part of the costs. When calculating the fee, the risk term, the country and buyer risk, but also your deductible for the risk and any existing collateral are taken into account. This means that smaller risks incur lower costs than high risks.

According to the principle of risk sharing beneficiaries of Euler Hermes cover must bear part of the risk themselves. The amount depends on the type of cover. This risk may not be covered by any other type of insurance and is borne in the event of a claim.

This excess regularly amounts to political risks 5 percent and for the 15 percent for non-payment and insolvency risks .

Premiums

The premium for insurance cover is calculated as a percentage of turnover or outstanding items. In addition to the general economic situation, company-specific factors are also taken into account when calculating the premium rate, such as

• the company's own industry
• the customer sector
• the export share,
• the quality of your own accounts receivable management,
• losses on receivables in the past.

The decision on damages is made within 2 months of receipt of all necessary documents. The compensation amount is paid out within a period of 1 month from notification of the claim settlement. In the case of buyer credit cover and the Wholeturnover Policy Light (APG-light), the processing period is reduced to 1 month and the payment period is 5 bank working days.

The APG-light is a cost-effective and easy-to-handle cover for short-term receivables with payment terms of up to 4 months for German exporting companies that repeatedly supply several customers in different countries.

Alternatives to credit insurance

In addition to state Hermes cover, private private export credit insurers in Germany. However, some of these do not provide cover for political risks.

The three largest private credit insurers operating in Germany are

• Euler Hermes Germany, Hamburg
• Coface Kreditversicherungs AG, Mainz
• Atradius Kreditversicherung, Cologne

• AGA portal
• APG-light