FACTORS CONTRIBUTING TO EXTROVERSION

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(2) FACTORS CONTRIBUTING TO “EXTROVERSION” The increase in “extroversion” may be achieved by the following:  Promotion of exports of goods and services,  Construction works abroad undertaken by Greek Companies,  Direct investments abroad, undertaken by Greek investors. RISKS: Commercial and political risks of non-payment may arise abroad, due to the economic and political instability still persisting in many developing countries which constitute the destination of many Greek products, construction works and direct investments.. 2.

(3) ECIO’s PROFILE . The Export Credit Insurance Organization (E.C.I.O.) was established in 1988 by Law 1796/1988 (Greek Gazette: 152 A’ /11.7.1988). – It is an autonomous, non-profit Organization, operating under the supervision of the Minister of Development and Competi-tiveness. – It offers export credit insurance (for non-marketable risks) with the Guarantees of the Greek State. – It is a Public Entity in Private Law. – It is governed by a 9-member Board of Directors which is appointed by the Supervising Minister.. . Its State Guarantee Capital amounts to EUR 1.47 billion.. 3.

(4) ECIO’s ORGANIZATIONAL STRUCTURE BOARD OF DIRECTORS. CHAIRMAN. GENERAL MANAGER. SECRETERIAT & PUBLIC RELATIONS. LEGAL AFFAIRS. COMPUTING & STATISTICS. SALES & CUSTOMER SERVICES. ΑΘΗΝΑ. 4. ΘΕΣΣΑΛΟΝΙΚΗ. ΤΜΗΜΑ ΕΜΠΟΡΙΚΩΝ ΠΛΗΡΟΦΟΡΙΩΝ & ΑΝΑΛΗΨΗΣ ΚΙΝΔΥΝΩΝ. ΤΜΗΜΑ ΜΕΣΟΜΑΚΡΟΠΡΟΘΕΣΜΩΝ ΠΙΣΤΩΣΕΩΝ & ΕΙΔΙΚΩΝ ΣΥΜΒΟΛΑΙΩΝ. ΤΜΗΜΑ ΑΠΟΖΗΜΙΩΣΕΩΝ & ΕΙΣΠΡΑΞΗΣ ΑΠΑΙΤΗΣΕΩΝ. ΤΜΗΜΑ ΔΙΕΘΝΩΝ ΣΧΕΣΕΩΝ & ΑΝΑΛΥΣΗΣ ΚΙΝΔΥΝΟΥ ΧΩΡΑΣ. ΤΜΗΜΑ ΣΤΡΑΤΗΓΙΚΗΣ ΠΩΛΗΣΕΩΝ (MARKETING). ΤΜΗΜΑ ΟΙΚΟΝΟΜΙΚΩΝ ΥΠΗΡΕΣΙΩΝ.

(5) ECIO DOES NOT FINANCE EXPORTS, BUT IT INDIRECTLY SUPPORTS EXPORTERS FOR THEIR FINANCING BY COMMERCIAL BANKS. . ECIO indirectly supports the financing of export companies, by allowing its insured clients-exporters to transfer their right for indemnification to the financing Commercial Banks or Factoring Companies, as a “collateral”.. 5.

(6) EXPORT CREDIT INSURANCE PROGRAMS 1. Insurance Programs for Short-Term Export Credits for exports of consumer goods. 2. Insurance Programs for Medium-Long Term Export Credits for exports of capital goods or construction works abroad due to be paid in 2 - 5 years or more. 2.1. Insurance Programs for «Supplier Credits». 2.2. Insurance Programs for «Buyer Credits». 3. Insurance Programs for Direct Investments Abroad.. 6.

(7) MAXIMUM REPAYMENT PERIODS FOR EXPORT CREDITS ACCORDING TO THE CATEGORIES OF PRODUCTS AND SERVICES . . According to EU and OECD rules, as well as the International Practice, the maximum repayment period for short-term export credits is 2 years, for medium-term export credits is 2-5 years, and for longterm export credits is over 5 years. The export credits with a repayment period over 2 years are defined as “Medium-Long Term”. According to certain rules of the “Berne Union” (International Union of Credits & Investment Insurers), which are applied by all OECD Member-Countries, and not only by them, for the maximum repayment periods of the insured export credits, we have the following: (i) (ii) (iii) (iv) 7. Consumer Goods and Raw Materials Intermediate and Durable Consumer Goods Capital Goods Turn-Key Projects. : 180 Days : Up to 2 Years : 2-5 Years : Over 5 Years.

(8) INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS. 8.

(9) RISKS COVERED BY ECIO . COMMERCIAL RISKS: a. INSOLVENCY for the payment (bankruptcy). b. PROTRACTED DEFAULT for the payment (In case the debtor delays the payment for more than 60 days). c. ARBITRARY WITHDRAWAL OR REFUSAL, amendment, or default of the Contract by a buyer or project owner (i.e. decision of the buyer to arbitrarily refuse the execution of the commercial contract, or the delivery of the ordered goods or services). Usually, the insured exporters request such coverage in cases the terms of payment are “CAD” (Cash Against Payment). 9.

(10) RISKS COVERED BY ECIO . POLITICAL RISKS –a. BREACH OF CONTRACT. Governmental measures impeding the execution of the commercial or loan contract. –b. MORATORIUM. General Moratorium decreed by the Government of the foreign country. –c. TRANSFER RISK. Currency bans. –d. EXPROPRIATION, NATIONALIZATION. Foreign Administration acts or omissions hindering the export contract performance or the operation of the investment. –e. INVALIDATION OF IMPORT OR EXPORT LICENCES. Export bans, invalidation of import or export licenses, etc., by the Domestic or Foreign Public Authorities. –f. ACTS OF GOD (FORCE MAJEURE). War, civil war, revolution, riots, civil disturbance, political strikes, natural disasters. – 10.

(11) PROCEDURE OF EXPORT CREDIT INSURANCE Submission of Application. Management of the Insurance Contract. Evaluation of Application. Approval and formation of the Insurance Contract 11.

(12) FOLLOW-UP OF THE DEVELOPMENT OF SHIPMENTS Submission of Documents after each Shipment. Payment of the Premium. Notification of Payments. 12. Notification of Claim.

(13) PROCEDURE OF INDEMNIFICATION Notification of Pending Claim. Submission of Documents Proving the Occurrence of Risk and the Existence of Loss. Verification of the Occurrence of Risk. Approval or Rejection of Indemnification 13.

(14) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS (Cases not covered by ECIO). The Short-Term Export Credits not covered by ECIO are those related to the following cases: .  . Shipment of Samples. Export Credits without a specific repayment period (Open Account). Export Credits related to Shipments “En Consignation”.. 14.

(15) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS (Terms of Payment covered by ECIO. . In case we have payment arrangements with a “Prepayment” or with an “Irrevocable and Confirmed Letter of Credit” (ILC), or “Cash Against Documents”, there is no need for export credit insurance since these are secured terms of payment.. . But usually, the agreed terms of payment are more “risky” like: “Documents Against Acceptance”, “Bills of Exchange”, “Promissory Notes”, “Checks” (Guaranteed or not), with a repayment period of up to 180 days.. . All the above terms of payment should be covered by an “Export Credit Insurance” Contract.. 15.

(16) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS (Insurance Program for Individual Shipments).  Specific Shipment (one, unique shipment).  Certain Shipments (partial shipments during one year, to certain foreign buyers and countries).. 16.

(17) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS (Insurance Program “GLOBAL”). Insurance for one (1) year, of all shipments to all foreign customers, to all countries. The exporter is covered by ECIO for his total annual exports, i.e. his shipments to all his customers abroad, independently of the risks to be covered. The exporter is obliged to submit for insurance all his invoices, up to the credit limit for each one of his foreign customers, except the invoices to be paid by “prepayment” or an “ILC”.. 17.

(18) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS Insurance Terms (I). . CREDIT LIMIT – The credit limit is defined as a maximum amount up to which the exporter can grant credits to his foreign customer at any time. In fact, the credit limit indicates the credit-worthiness of each foreign customer. – By evaluating each foreign buyer’s Credit Report, the Underwriters of ECIO are convinced that the specific foreign buyer is in a position to repay the granted credit in the specific period of time set by the terms of payment.. 18.

(19) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS Insurance Terms (IΙ). . CREDIT LIMIT: – It refers to a specific foreign buyer. – It decreases with every shipment to the specific foreign buyer.. – It comes back with every repayment for past shipments, i.e. it is revolving.. 19.

(20) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS Insurance Terms (IΙΙ). . PERCENTAGE OF COVER – The level of the insurance coverage is estimated as a percentage of the invoice value and is applied on the specific credit limit. In fact, the percentage of cover applied to the credit limit represents the amount of indemnification to be paid to the insured exporter in case of non-payment by a foreign buyer. – According to ECIO’s Statute Law, the percentage of cover may be set up to 95%, but the specific percentage of cover to be set for each insurance policy depends on the information about the credit-worthiness of the foreign buyer as well as the economic and political situation in the country of destination (country risk). 20.

(21) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS Insurance Terms (IV). . PREMIUM  It is set as a percentage of the invoice value of shipments and up to the credit limit granted for the specific foreign buyer.  It depends on certain factors, such as the number of risks to be covered, the terms of payment, the credit-worthiness of the foreign buyer, etc.  It is paid upfront, in case of a unique shipment, or in monthly installments in case of multiple shipments.  The premiums for “GLOBAL” Insurance Policies are set at much lower levels than the premiums for “Individual Shipments” Insurance Policies.. 21.

(22) 1. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS Insurance Terms (V) . MAXIMUM AMOUNT OF INDEMNIFICATION The maximum aggregate amount of indemnifications which can be paid to an insured exporter during an underwriting year is equal to the 20fold of the total premium payments made by the insured exporter during the same underwriting year.. For example, if in a certain underwriting year an export company was insured for its total shipments amounting to €2,000,000 and paid total premiums amounting to €16,000 (with a premium 0.80%), then this company has the right to receive total indemnifications amounting up to €320,000. 22.

(23) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS Insurance Terms (VΙ). . MINIMUM ANNUAL PREMIUM (MAP). . ECIO may apply a “Minimum Annual Premium” (MAP), whose level depends on the approved credit limits and the annual turn-over of the export shipments as declared by the insured exporter. The (MAP) will have to be paid upfront, in case the Insurance Policy covers the shipments to only one buyer, or in two installments, in case the Insurance Policy covers more than one foreign buyers. During the period of shipments, no premium will have to be paid until the moment the already paid (MAP) corresponds to the shipments already made. In case the shipments continue, the exporter will have to pay the agreed premium for the extra shipments. In case the shipments made during the underwriting year are not enough to absorb the whole (MAP) already paid, then the remaining (MAP) neither is returned to the insured exporter, nor is balanced with the premium to be paid in the framework of the renewed Insurance Policy for the next underwriting year.. . . . 23.

(24) 1.. INSURANCE PROGRAM FOR SHORT-TERM EXPORT CREDITS Insurance Terms (VII). . COST OF RESEARCH PROCEDURE. . This cost is defined as the exporter’s contribution to the required expenses for the. collection and evaluation of credit information about the credit-worthiness of foreign buyers, as well as the setting of a maximum credit limit for each foreign buyer. . For the «GLOBAL» Insurance Policies it is €40,00 per foreign buyer.. . For the «Individual Shipments» Insurance Policies it is geographically differentiated as follows per foreign buyer:. . E.U Countries: €60,00. . Central & Eastern European Countries: €100,00. . Rest of the World: €70,00. 24.

(25) INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS RELATED TO EXPORTS OF CAPITAL GOODS AND CONSTRUCTION WORKS ABROAD. 25.

(26) 2. INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS Exports of Goods or Services with a Medium-Term (2-5 years) or with a Long-Term (over 5 years) Repayment Period.. . •. Construction Works Abroad, also with a MediouTerm or a Long-Term Repayment Period. FORMS OF FINANCING & INSURANCE PROCEDURES. «Supplier Credit». 26. «Buyer Credit».

(27) SUPPLIER CREDIT. EXPORTER (SUPPLIER). 1 2. IMPORTER (BUYER). 3 1. Delivery of Goods. 2. Payment on «credit terms». ECIO.. 27. 3. Insurance of «Supplier’s Credit» by ECIO against commercial and political risks..

(28) BUYER CREDIT. EXPORTER. 2. ECIO 1. Supply Contract. 2. Premium Agreement.. 1. 3. 3. Insurance Contract. 4. Loan Agreement.. BUYER 28. 4. BANK.

(29) BUYER CREDIT. EXPORTER. α. ECIO α. The Exporter pays the premium to ECIO.. β. γ. β. The Buyer pays the down-payment to the Exporter.. ε. γ. The Bank makes disbursements of the loan by paying the exporter. δ. The Buyer repays the bank loan. ε. ECIO indemnifies the bank in case there is no repayment by the buyer.. BUYER 29. δ. BANK.

(30) 2. INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS (I) . COMMERCIAL RISKS: a. INSOLVENCY for the payment (bankruptcy) b. PROTRACTED DEFAULT for the payment (In case the debtor delays the payment for more than 60 days). c. ARBITRARY WITHDRAWAL OR REFUSAL, amendment, or default of the Contract by a buyer or project owner (i.e. decision of the buyer to arbitrarily refuse the execution of the commercial contract, or the delivery of the ordered goods or services). Usually, the insured exporters request such coverage in cases the terms of payment are “CAD” (Cash Against Documents). 30.

(31) 2. INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS (II) . POLITICAL RISKS: –a. BREACH OF CONTRACT. In case of DFIs, arbitrary revocation of a Concession Agreement by the host country. –b. MORATORIUM. General Moratorium decreed by the Government of the destination country, or the host country. –c. TRANSFER RISK. Currency bans. –d . EXPROPRIATION, NATIONALIZATION. Foreign Administration Acts or Omissions hindering the export contract performance or the operation of the investment. –e. INVALIDATION OF IMPORT OR EXPORT LICENCES by the Domestic or Foreign Public Authorities. –f. ACTS OF GOD (FORCE MAJEUR). War, civil war, revolution, riots, civil disturbance, political strikes, natural disasters. – 31.

(32) 2. INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS (III) . Procedures for Insurance and Indemnification:. The prerequisites and rules are more or less the same as those holding for Insurance Programs for Short-Term Export Credits. Additionally: a. The Insurance Policies are not as standardized as those for Short-term Export Credits, since in the case of MLT Export Credits, the Insurance Policies are directly related to the Supply Contracts. b. Coverage is offered for commercial risks, or political risks, or a combination of both (it depends to the country of destination). . ECIO is obliged to apply certain rules, as they hold according to the OECD Agreement “Arrangement on Officially Supported Export Credits”. In the framework of OECD this is a “Gentlemen’s Agreement”, but in the framework of EU, the same text constitutes a “Council Decision”.. 32.

(33) 2. INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS (IV)  The main provisions of the “Arrangement on Officially Supported Export Credits” are the following:. – Minimum Down-payment: 15% on the value of the export contract.. – Maximum Repayment Period: 5 years for the destination countries of category I and 10 years for the destination countries of category II (as classified by the World Bank, according to their income per capita). – Minimum Premium Rates (MPRs): They are based on the credit period and the category indicating the political risk in the country of the debtor (Categories: 0,1,2, 3,.......7) according to the CRAM (Country Risk Assessment Model) of the OECD. The MPRs indicated in the relevant “confidential” table cover the whole “package” of political risks, i.e. the sovereign risk plus the country risks.. 33.

(34) 2. INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS (V) – The premiums have to be paid upfront, or in installments, but they have to be paid entirely until the Starting Point of Credit (SPOC), that is immediately after the delivery of goods or the delivery of the final phase of the project. In other words, the total premium have to paid entirely when the credit risk starts.. – The Repayment must be made in semiannual installments of capital and interest, while a “grace period” of 6 months is allowed.. – Environmental Protection. Each application for the export credit insurance of a project is evaluated for the possible negative effects of the project on the environment. The relevant procedures have been defined in the “OECD Recommendation on Common Approaches to the Environment and Officially Supported Export Credits”.. – Bribery. During the application process and the management of the the Insurance Policy, certain rules and provisions are applied according to the “OECD Recommendation on Bribery and Officially Supported Export Credits”. These provisions aim at combating the bribery of High Officials of a Government, in order to win a commercial contract .. 34.

(35) 2. INSURANCE PROGRAMS FOR MEDIUM-LONG TERM EXPORT CREDITS (VI) . EXAMPLES OF MINIMUM PREMIUM RATES (MPRs) FOR THE COVERAGE OF POLITICAL RISKS, ACCORDING TO THE OECD “ARRANGEMENT ON OFFICIALLY SUPPORTED EXPORT CREDITS”.. . Let us assume that we have 7 applications for the credit insurance of 7 projects against political risks, to be undertaken in 7 countries. The value of each project is the same, the construction period is 24 months and the repayment period is 5 years (in 10 semiannual installments). The Minimum Premium Rate (MPR) for each case will be as follows:. . HONG ΚΟΝG CHINA BRAZIL TURKEY FYROM ALBANIA MOLDOVA.      . 35. (category of political risk 1): (category of political risk 2): (category of political risk 3): (category of political risk 4): (category of political risk 5): (category of political risk 6): (category of political risk 7):. MPR 0,95%. MPR 1,67%. MPR 2,73%. MPR 4,00%. MPR 5,48%. MPR 6,90%. MPR 8,52%..

(36) INSURANCE PROGRAM FOR DIRECT FOREIGN INVESTMENTS. 36.

(37) 3. INSURANCE PROGRAM FOR DIRECT INVESTMENTS ABROAD  POLITICAL RISKS 1. BREACH OF CONTRACT. Revocation of Concession Agreements by the Government of the host country. 2. TRANSFER RISK. Inability for transfer of foreign exchange for capital amortization and export of profits. 3. EXPROPRIATION, NATIONALIZATION. Any other equivalent measures hindering the operation of the investment or make it non viable. 4. ACTS OF GOD (FORCE MAJEUR). War, civil war, riots, civil disturbance, political strikes, natural disasters. 37.

(38) 3. INSURANCE PROGRAM FOR DIRECT INVESTMENTS ABROAD INSURANCE PREREQUISITES (I)     . . . 38. Kinds of Investments (Capital for a new investment or for the purchase of shares of an existing investment, Equipment, Machinery, Pieces of Land, Buildings, Services). New investment or extension of an existing investment. Coverage of the (%) of the Greek participation only (in case of joint venture). Coverage of political risks only (the Greek investor is responsible for the commercial viability of the investment). The Investment Insurance Policy has a minimum duration of 3 years and it may be renewed for up to 20 years by annual renewals with the updated current value of the investment.. The Investment Insurance Policy includes the “maximum” and the ”current” insured values of the investment. The “current” value is formed by the partial exports of capital. In 2001 a “Memorandum of Understanding” (MoU) was signed between ECIO and MIGA (Multilateral Investment Guarantee Agency – Subsidiary of the World Bank Group) by which ECIO is reinsured by MIGA for investment insurance..

(39) 3. INSURANCE PROGRAM FOR DIRECT INVESTMENTS ABROAD INSURANCE PREREQUISITES (II) .   . 39. Direct or indirect benefit for the Greek Economy, i.e. through imports of raw materials or intermediate products from Greece, or transfer of amortization capital and profits to Greece, etc. Approval by the host country, i.e. the Authorities of the host country will have to approve the specific investment. Existence of Legal Framework for the protection of foreign capital in the host country. Existence of an «Agreement for the Mutual Protection of Investments” between Greece and the Host Country. This does not mean that in case such an Agreement does not exist, the relevant application will not be examined by ECIO. On the other hand, it goes without saying that in case such an Agreement exists, this will be positively taken into account in the framework of the evaluation of the relevant insurance application by ECIO’s Board of Directors..

(40) 3. INSURANCE PROGRAM FOR DIRECT INVESTMENTS ABROAD INSURANCE TERMS   . . 40. The Insurance Policies are not standardized since they are directly related to the specific investment. The maximum percentage of cover is 95%, while it is differentiated according to the host country, with a minimum level of 75%. The annual premium varies between 0,35% and 0,45% per political risk and it is paid at the beginning of the insurance period, as well as at the beginning of each annual renewal of the insurance policy, according to the “current” value of the investment, which can be changed according to the amortization of the invested capital and the invested profits. Together with the annual premium, each year the “standby” premium has to be paid. The level of the “standby” premium is about 50% of the annual premium which depends on the number of political risks that have been chosen by the insured investor. The “standby” premium is applied on the amount which constitutes the difference between the “maximum” and the “current” insured values..

(41) 3. INSURANCE PROGRAM FOR DFIs Insurance Procedures Submission of application for the Υποβολή Εγγράφου Αιτήματος για κατ’ preliminary approval by ECIO’s αρχήν έγκριση από Δ.Σ. ΤΟΥ ΟΑΕΠ Board of το Directors Submission of Feasibility Study of the Υποβολή Μελέτης Βιωσιμότητας της investment, and in case it is required, Επένδυσης, και αν απαιτείται submission of environmental study Περιβαλλοντική Μελέτη Final approval by ECIO’s Board of Οριστική Έγκριση από Δ.Σ., Directors, Notification of the insurance Γνωστοποίηση Όρων Ασφάλισης και terms and signing of the Insurance Policy Σύνταξη Ασφαλ. Συμβολαίου. 41. Payment of the annual premiums during Καταβολή Ασφαλίστρων κατά τη Διάρκεια the insurance period της Ασφαλιστικής Περιόδου.

(42) 3. INSURANCE PROGRAM FOR DFIs Indemnification Procedures Notification of Claim. Submission of documents proving the occurrence of risk/risks. Evaluation of documents by ECIO’s Legal Service. Procedure for the payment of indemnification 42.

(43) WE THANK YOU In case you are interested for more information about ECIO’s Insurance Programs, you may visit our site:. www.ecio.gr. 43.

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