Export Credit Insurance
Export Credit Insurance (ECI) mitigates the payment risk associated with foreign trade. ECI guarantees payment on commodities exported to foreign country and thus protects the exporter against non-payment.
A Little More on What is Export Credit Insurance
The Export Credit Insurance or ECI mitigates payment risk associated with international business. More specifically, it ensures and encourages exporters by giving conditional assurance of payment in case of nonpayment by foreign buyers.
The Export Credit Insurance covers broad categories of risks. For instance, the ECI insure exporters against commercial risk (default, bankruptcy, and insolvency of the buyer) and political risk (including war, revolution, terrorism etc.). The Export Credit Insurance also covers currency risk and import and export regulations that may result in losses.
References for Export Credit Insurance
Academic Research on Export Credit Insurance
- ● Export credit insurance, Funatsu, H. (1986). Export credit insurance. Journal of Risk and Insurance, 679-692.
- ● Testing the trade credit and trade link: evidence from data on export credit insurance, Auboin, M., & Engemann, M. (2014). Review of World Economics, 150(4), 715-743. This paper analyses the effect of trade credit on trade on a macro level through a whole cycle. This paper employs Berne Union data on export credit insurance, the most extensive dataset on trade credits available at the moment, for the period of 2005–2011. Using an instrumentation strategy, a significantly positive effect of insured trade credit can be easily identified, as a proxy for trade credits, on trade.
- ● The private export credit insurance effect on trade, Van der Veer, K. J. (2015). Journal of Risk and Insurance, 82(3), 601-624. This paper analyses the impact of trade finance (credit or insurance) by financial institutions on international trades. This article uses a unique bilateral data set on worldwide exports insured by a world’s leading private trade credit insurer in the period from 1992 to 2006. Results from this data suggests that the private export credit insurance effect on trade is larger than the value of exports insured.
- ● Public export credit guarantees and foreign trade structure: Evidence from Austria, Egger, P., & Url, T. (2006). World Economy, 29(4), 399-418.
- ● An option-pricing approach to the costs of export credit insurance, Schich, S. T. (1997). The Geneva Papers on Risk and Insurance Theory, 22(1), 43-58. This article investigates the relationship between a debtor country’s external financial indicators and the costs associated with the insurance of export credits to that country. The empirical results of a statistical analysis of the premium rates for ECI, applied by a private export credit insurer to seventy-seven developing countries during 1993, provide some support for these hypotheses. This article provides evidence that option pricing parameters do play role in practical insurance pricing, even if this pricing is not explicitly based on these parameters.
- ● Export credit insurance: Comment, Eeckhoudt, L., & Louberge, H. (1988). Journal of risk and insurance, 742-747. The present paper conducts a positive analysis on several important aspects of export credit insurance. The study shows that export credit insurance is a useful device to protect domestic exporting firms against various political risks and default risk in the foreign market. However, the author points out that the government can utilize export credit insurance aggressively to promote exports by intentionally setting a more-than-favorable premium rate.
- ● A Cosmopolitan View of Bottom-Up Transnational Lawmaking: The Case of Export Credit Insurance, Levit, J. K. (2005). Wayne L. Rev., 51, 1193. This essay, based on a presentation at Law Beyond Borders: Jurisdiction in an Era of Globalization, a panel at the AALS 2005 Annual Meeting, examines bottom-up transnational lawmaking via the technical world of export credit insurance.
- ● Export Credit Insurance. Its Role in Expanding World Trade, Greene, M. R. (1965). The Journal of Risk and Insurance, 32(2), 177-193.
- ● Export credit and insurance for export promotion, Fitzgerald, B., & Monson, T. (1988). Finance and Development, 25(4), 53. Rationales for preferential export credit and export credit insurance are reviewed and several countries’ programs are examined to determine if these preferential programs are appropriate export promotion instruments for developing countries. Market failure is the most compelling rationale for their introduction but these arguments have not been well articulated and there is no systematic analysis of the costs of alternative government responses. Industrial countries’ programs have histories of subsidy while developing countries’ preferential programs have not been significant factors in stimulating exports.
- ● Credit insurance in support of international trade Observations throughout the crisis, Morel, F., & Union, B. (2010). Trade Finance during the Great Trade Collapse, 337-355.
- ● British export credit insurance, Dietrich, E. B. (1935). The American Economic Review, 236-249.
- ● Setting up an export credit insurance agency, Stephens, M. (1996, January). In International Trade Forum (No. 3, p. 4). International Trade Centre.