Export Credit Insurance protects exporters against the risk of non payment by foreign buyers due to commercial or political reasons.
How It Works:
- The exporter purchases an insurance policy.
- Goods are exported on credit terms.
- If the buyer fails to pay, the exporter files a claim.
- The insurer compensates for the loss as per policy terms.
Benefits:
- Protects against payment defaults
- Reduces risk in international trade
- Enables exporters to offer competitive credit terms
- Improves confidence in global expansion
Example:
An exporter sells goods on credit to a foreign buyer who later defaults. The insurance provider compensates the exporter for the loss.