Export Insurance consists of:
a. Export Credit Insurance (ECI) Offers protection for exporter against potential loss due to nonperformed payment of importer/Letter of Credit bank issuer. Some important features of the product are as follows:
- Export Insurance is a type of insurance providing indemnity to Exporter against potential loss risk due to non-acceptance of full payment from importer or Bank issuing LC due to Commercial Risk and/or Political Risk.
Benefits of Export insurance are:
Benefits for Exporters:
- To secure Exporters in dealing with export risks and to encourage Exporters in penetrating new export market by offering very affordable premium.
- Exporters are able to offer or fulfill importer’s demand to use the terms of payment with lenient payment condition (non L/C) but having relatively higher default payment risk such as Documents Against Acceptance (D/A), Document Against Payment (D/P) and Open Account (O/A); this risk may be insured to Asei Re.
- Exporter may meet market demand derived from importers that particularly exist in nontraditional market.
- Exporter may use Export Credit Insurance for the purpose of obtaining export bill discount financing (post-shipment export financing) where the Export Insurance serves as an additional guarantee to the bank.
b. Benefit for Bank
- To facilitate banks in providing post-shipment export financing by discounting export bills/export notes owned by exprters.
- Bank obtaining letter of indemnity entitlement (SPHGR) from exporter will obtain benefit in the form of value added to export note discounted by the Bank, which has been insured against payment risk from importer by Asei Re.
Risks of Export Insurance are as follows
a. Commercial Risk
- Importer is insolvent (bankrupt)
- Importer is in default
- Importer rejects to receive shipped items
b. Political Risk
- Transfer prohibition
- Import quota limitation
- Import permit revocation
- War or other hostile actions.
Amount of Indemnity
Asei Re will pay maximum indemnity at 85% of the loss, while the remaining 15% will be covered by the Exporter.
Premium Calculation Basis
The amount of premium is calculated based on the risk related to:
- Class of Payment Origin Country (country risk)
- Payment method (L/C or Non-L/C)
- Credit payment period (Tenor, maximum 180 days) Terms of Payment
Asei Re may terminate the guarantee of export transaction using Terms of Payment secured by L/C (Sight L/C and Usance L/C) or not secured by L/C (Documentary Collection such as D/A, D/P) and O/A.
Reinsurance’s support for Export Credit Insurance products is derived from well-known domestic and overseas reinsurance companies, namely:
- Atradius Re
- Nationale Borg
- Swiss Re
- Asuransi Central Asia
- Asuransi Jasa Raharja Putera
- Tugu Re
- Asuransi Jasa Indonesia
- Asuransi Asoka Mas
- Asuransi Binagriya Upakara
- Asuransi Kredit Indonesia
- Reasuransi Nasional Indonesia
- Asuransi Bumida 1967
- Asuransi Tugu Pratama Indonesia
Indemnity that Asei Re pays to the Exporter shall not release the Importer’s payment obligations to the Exporters. Any payment of Importer is proportionally divided between Asei Re and Exporter according to the indemnity share of Asei Re.
Export Bill Insurance (EBI)
Guarantees from Asei Re have encouraged banks to be more salient in offerring Post Shipment Financing to the exporters, although the exports are executed by non-L/C media. Through this product, exporters will be able to meet the need of working capital and cash flows. Following are important information of the products:
- This type of insurance will provide protection to the Bank taking over (negotiable) export bill of exportercustomers against the foreign buyer’s default due to commercial risk and/or political risk.
- This insurance is provided to guarantee the Export Money Notes Negotiation:
- On the basis of Usance L/C from the Issuing Banks
- On the basis of Document Against Acceptance (D/A)
- On the basis of Document Against Payment (D/P)
- On the basis of Open Account (D/P)
Benefit of EBI
- Exporter obtains protection against any potential non-collectible account receivables due to commercial and political risks.
- It may assist the need of liquidity (cash flows) of the Company
- It becomes a risk mitigation for the Bank to Asei Re
- It may optimize/ improve the provision of Non L/C financing facility to the customers