- Leoforos Eleftheriou Venizelou 57, Athens 105 64, Greece
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1. Export Credit Insurance Organization (ECIO) profile and capabilities
Exporters all over the world face a dual problem on a daily basis: Finding buyers abroad to sell their products and making sure they are paid for the goods they export on credit terms.
The Export Credit Insurance Organization (ECIO) was established by L.1796/1988, it is an autonomous legal entity in private law, it is a non-profit Organization which is governed by a 9-member Board of Directors, it is supervised by the Ministry of Economy and Finance, while its State Guarantee Capital amounts today to 1.47 billion euros.
ECIO insures, against commercial and political risks of non-payment, the export credits granted by Greek exporters to foreign buyers abroad who buy Greek products, services, or even projects. ECIO also insures, against political risks, the investments undertaken abroad by Greek entrepreneurs.
By offering the above services, ECIO effectively contributes to the “extroversion” of the Greek Economy. That is why we call all Greek exporters to sign an export credit insurance policy with ECIO. Not only for their own benefit, but also for the benefit of the Greek Economy as a whole.
2. Short-term export credit insurance scheme
As it is known, ECIO’s most important function to this date is to insure Greek exporters against commercial and political risks of non payment for short term export credits. Naturally, export credits of both Greek products and services can be insured.
Article 3 of ECIO’s Statute Law (1796/88) describes the covered risks as being commercial, political and/or catastrophical. The most important commercial risks of non payment are insolvency or delinquency in relation to the foreign buyer. Important political risks are events such as war, currency bans, revocation of import or export licenses by foreign authorities or other disturbances that prevent the exporter from performing under the supply contract or the buyer from making payment whereas catastrophical risks could be earthquakes, natural disasters, etc.
The insurance procedure is very short and simple. The exporter fills out the insurance application form which can be sent to ECIO, either by Fax (as is for 95% of the cases) or mail (electronic or regular) or have it delivered by the exporter himself. The request is then reviewed by the appropriate department and a recommendation is sent to the Governing Board for approval. ECIO’s decision process usually doesn’t take more than 5-6 days (the average necessary time for ECIO to collect and evaluate any financial information available for a specific foreign buyer) unless the country of destination is in Eastern Europe, in which case the timeframe is longer. If the application is successful, ECIO notifies the exporter of the “insurance terms” and both parties sign the Insurance Policy.
At this point it is necessary to explain the three basic insurance terms, (1) the percentage of cover for the shipment value of goods, (2) the credit limit for every specific foreign buyer and (3) the premium rate.
(i). Percentage of Cover: According to article 5 of ECIO’s Statute Law (1796/88) the Organization can cover up to 95% of the insured shipment value. Naturally, the percentage of cover in each case depends upon the foreign buyers’ credit rating and the existing political and economic situation in the country of destination. It is for this reason why the percentages of cover differ among commercial and political risks.
(ii). Credit Limit: The insured exporter can extend a credit limit to the specific foreign buyer up to a maximum amount for the agreed credit period. The credit limit is “revolving” and cannot be extended in the case of an outstanding payment.
(iii). Premium: The premium is set on a “case-by-case” basis and is calculated as a certain percentage of the shipment value (of the invoice). Basically, the premium depends upon the number of commercial and political risks the exporter wants to be covered against in conjunction with other parameters taken into consideration such as, the kind of product(s) to export, the foreign buyers’ credit rating, the terms of payment, the political and economic situation in the country of destination, etc. We should mention here that the exporter, with ECIO’s approval, can assign his rights for indemnification against the debtor (rights that are derived from the Insurance Policy) to a bank in a form of collateral, in return for his financing. Of course, these rights can be assigned to a third party, i.e. a businessman, etc.
In the case that a risk occurs, the exporter is obliged to inform ECIO, in writing, of this occurrence, within a period of 20 days. The occurrence can only be proven with official documents. i.e, in the cases of insolvency or delinquency an official document of the court decision or court order should be submitted, respectively.
When the Organization is notified, it will put into effect the procedures for risk verification. When all necessary information is collected and there is no doubt to the extent of the claim and the risk is verified, the Claims and Recoveries Department will send a Recommendation Letter (accompanied by a reference letter from the Legal Affairs Department) to the Governing Board of ECIO. The Governing Board decides on the acceptance or refusal of the claim. In case the decision is in favour of the exporter, he’s notified to receive the appropriate indemnification.
The time lag between the risk actually occurring and the indemnification taking place could be in the range of 3 to 6 months, assuming the risk verifiably had occurred. This needed time depends upon the country of destination and thus, directly, on both the exporter’s responsibility (to follow the set procedures for claiming indemnification) and ECIO (to verify the occurrence of the risk in short time).
Finally, the procedure for claiming indemnification is described in every detail under the General and Specific Terms Section of the Insurance Policies. The insured exporters must read these terms very thoroughly and comply with them to the fullest.
3. Medium-term to long-term export credit insurance services
The scope of this scheme is the insurance of export credits to be repaid in the Medium Term (2-5 years) or Long Term (more than 5 years) against political and commercial risks. Due to the long period of the credit, it entails the export of intermediate goods, quasi-capital goods, capital goods and services and even complete plants and factories.
T he insurance procedure is very short and simple . The exporter fills out the insurance application form which is reviewed by the Medium-Long Term Underwriting and Special Contracts Department. Since the exporter has to apply to ECIO as soon as possible and before the finalisation of the export contract, the procedure for the insurance coverage includes two stages. Initially, there is a “provisional” approval by the Board of Directors. At a second stage, after the review of the export contract and all related documents there is the final approval.
4. Construction works insurance schemes
Since 1996, ECIO is offering Construction Insurance Schemes for projects undertaken by Greek construction companies abroad. Through these schemes ECIO insures against non payment of obligations due to political and commercial risks of the foreign public or private entity.
Therefore, ECIO helps the Greek construction companies in the following ways: ECIO insures payment upon completion of the Project and also, helps (indirectly) in financing it through a bank since the insured Construction Company (with ECIO’s approval) may use, as Collateral, its right to assign any possible future claims of compensation to a Financial Institution.
As far as the payment of the insurance fees is concerned, they must be paid either up front or in instalments. In any case, the insured company must have paid the fees before the start of the repayment period of the construction project.
Concerning the insurance procedure, there are two documents associated with the specific scheme. An application form that the applicant company has to fill in and the Insurance Contract to be signed if the application is approved. Along with the application, the company must provide to the ECIO the contract between the Greek construction company and the foreign entity which is responsible for the repayment of the credit.
Since, in most cases, at the time of the application the company cannot provide all the necessary documents, ECIO’s Board of Directors can offer a “provisional” approval of the project. The elements that determine whether the construction project can be insured are, among others, ECIO’s Statute Law, the economic and political condition of the country where the project will be constructed, the credibility of the foreign entity etc. After the company provides all the final documents to ECIO, the Board decides for the final approval. If the project is approved the Insurance Contract is signed.
5. Buyer’s credit insurance schemes
ECIO has always been aiming at providing the necessary tools for backing Greek exports. Under this scope, a new product is under development: Credit Insurance in the form of Buyer’s Credit . In a Supplier’s Form Insurance Scheme ECIO insures the Greek exporter directly, whereas in the Buyer’s Credit Scheme ECIO insures the credit given by a Greek bank (or a foreign bank’s branch in Greece) to the foreign importer so the latter will buy Greek products.
In Buyer’s Credit Scheme, there are two sub-categories, depending on the credit receiver; in the case where the borrower is a Foreign State, the Greek bank grants the loan to the Central Bank or a first Class Commercial Bank. In the case of a privately owned importing company , the Greek bank grants the loan either directly to the foreign buyer or through an intermediate bank in his country.
The first case is known internationally as “Line of Credit” (Revolving Credit Facility) , while all agreements take place in a “Governmental Level”. In this line of work ECIO has already acquired enough experience taking into account the signing of a Guarantee Contract with the National Bank of Greece, in the beginning of the 90’s, providing $20 million dollars worth of Line Credit to Albania and the signing of Guarantee Contracts with both the National and Commercial Bank of Greece providing Lines of Credit to Romania, Georgia, Armenia and Moldavia.
6. Overseas investment insurance schemes
Since 1996, ECIO is offering Insurance Schemes against political risks concerning Investments overseas . It should be emphasized that ECIO, in reference to Investments, covers only political risks and not credit risks, with a minimum insurance period of 3 years . In other words, the investments’ failure due to commercial reasoning will not be covered. Political risks covered by ECIO are, war (even civil), nationalization or expropriation, currency bans, as-well-as adverse legal or regulatory amendments (on the status quo of foreign investment protection) to such an extent that investments are no longer viable, and only for this reason.
What should be made clear is that ECIO covers direct investment for the founding of a new industrial or commercial entity abroad or the participation (equity investment) in an already existing company abroad. Insuring an “old” investment that occurred in previous years is not possible, however, it is possible to insure the increase of capital in an already existing investment. In the case that the new formed company is a joint venture between Greek and foreign investors, ECIO covers only the Greek participation.
As far as applying for this scheme , specific application forms must be filled out in which detailed information and specific documents need to be provided to ECIO regarding the company’s Statute Law, feasibility studies related to the project, letters of guarantee from the foreign governments, etc. Following that, the MLT Underwriting Department evaluates the application and, after all parameters are taken into consideration, it submits the file and the proposal to the Board of Directors. If the application is successful, the applicant is contacted and notified about the Specific and General Terms of the Contract. Upon agreement, the Insurance Policy is signed by both parties. All General and Specific Terms are listed in the contract.
Last but not least, if any of the risks covered under the policy actually occur, the insured party must notify ECIO and provide documents that prove, beyond any doubt, no negligence in the part of the insured and of course the extent of the damage.