Export Finance and Insurance Corporation has entered into reciprocal reinsurance agreements with its French and US counterparts, Compagnie Française d'Assurance pour le Commerce Extérieur (COFACE) and Export-Import Bank of the United States (US Ex-Im Bank). The agreements will enable Australian, French and US companies to participate more easily in joint international contracts and to benefit from the streamlined financing packages and administrative efficiencies that the agreements create.
Under a typical reinsurance agreement, the lead ECA provides export credit cover, on its usual terms, for an entire transaction. Another ECA, assisting an exporter from its own country who may be a sub-contractor or other party to the transaction, reinsures the lead ECA in relation to that party’s involvement in the transaction. The effect is that the second ECA takes on that share of the risk. EFIC’s agreements with COFACE and US Ex-Im Bank are a ‘win’ for exporters, their overseas buyers and the ECAs,’ says Chang Foo, Head of Product Management and Risk Transfer at EFIC.
‘These agreements can facilitate the participation of Australian exporters in large overseas contracts, as they know that EFIC has the ability, along with other ECAs and subject to EFIC’s usual commercial terms, to package the required financing. Overseas buyers find reciprocal reinsurance agreements particularly appealing when choosing suppliers because of the one-stop nature of the service – they need only negotiate one set of documents, with the lead ECA,’ he explains. ‘And finally, for ECAs, these arrangements mean they should be able to assist exporters by supporting multi-million dollar contracts and then share the risk with other ECAs.’
With increasing globalisation of supply chains, large projects often source supplies from companies in multiple countries. Multi-sourcing means that an Australian exporter may take a lead role in a major project, or it may be invited by an overseas company to act as sub-contractor to the main export contract. EFIC has considerable experience in these types of arrangements, having entered into reinsurance agreements with several other ECAs: Japan’s Nippon Export and Investment Insurance (NEXI), Germany’s Euler Hermes Kreditversicherungs AG, Sweden’s Exportkreditnämnden (EKN), Belgium’s Office National du Ducroire (ONDD), Atradius Dutch State Business NV, the Israel Export Insurance Corporation (ASHRA) and the Korea Export Insurance Corporation.