Export Finance and Insurance Corporation (EFIC) , Australia’s export credit agency, has signed a Reciprocal Reinsurance Agreement with its Korean counterpart, the Korea Export Insurance Corporation (KEIC).
The agreement is part of the coordinated response to the global financial crisis to ensure businesses in the Asia-Pacific region continue to have access to trade finance to sustain export activities. It represents an important contribution to the Asia-Pacific Trade Insurance Network, and also supports the G20 commitment in April to make US$250 billion available for trade finance over the next two years.
The reinsurance agreement is intended to assist Australian and Korean companies to collaborate more easily on international contracts and benefit from the streamlined financing packages and administrative efficiencies created under the agreement. ‘Overseas buyers find reciprocal reinsurance agreements particularly appealing when choosing suppliers because of the one-stop nature of the service,’ said Chang Foo, Head of Product Management and Risk Transfer at EFIC. ‘They need only deal with the lead export credit agency, saving costs and time in finalising a contract. This type of agreement can facilitate the participation of Australian exporters in large overseas contracts.’
With increasing globalisation, large projects often source supplies from multiple countries. This provides Australian exporters with opportunities not only to take lead roles but also to be invited by overseas companies to be sub-contractors to the main export contract.
Under reinsurance agreements, the lead export credit agency (ECA) provides export credit cover for the entire transaction on its usual terms, while the other ECA, whose exporter is a sub-contractor, provides reinsurance, for its portion of the transaction, to the lead ECA.
Buyers and borrowers need only negotiate one set of documents with the lead ECA. EFIC will continue to work within the Berne Union Asian Regional Cooperation Group and other forums to explore opportunities to further expand the Asia-Pacific reinsurance network. The expanded network will enhance EFIC’s ability to meet the needs of Australian exporters and will support the development of international trade.
EFIC has already established reinsurance agreements with Nippon Export and Investment Insurance (NEXI) of Japan, Euler Hermes Kreditversicherungs AG of Germany, Exportkreditnämnden (EKN) of Sweden, Office National du Ducroire (ONDD) of Belgium, Atradius Dutch State Business NV, and the Israel Export Insurance Corporation Ltd (ASHRA).