Export credit insurance
What is export credit insurance?
Export credit insurance helps exporters to secure payments and commercial contracts with foreign buyers and remain competitive in international markets by protecting either the exporter or the financial institution financing the transaction. It covers both commercial risks (like bankruptcy, insolvency, or late payment) and political risks (like war, sanctions, or blocked currency transfers).
Export credit insurance is not mandatory in the EU, but in practice stakeholders such as banks or investors might make it a requirement to reduce their risk if they invest in an exporting business. EU law regulates how export credit insurance is offered.
How export credit insurance works
When a business sells goods outside of the EU, the buyer often pays later under credit. To reduce the risk of there being an issue with the payment, a business can take out export credit insurance. If the buyer pays on time, nothing happens. But if the buyer fails to pay due to insolvency, political events, or other problems the insurer steps in and reimburses most of the loss, usually around 80% to 95% of the transaction. There are two kinds of export credit insurance: private and government-backed.
Private export credit insurance in the EU
Private export credit insurance is offered by commercial insurance companies and is mainly used for short-term trade transactions, usually up to 2 years. It protects exporters against common buyer risks such as:
- insolvency,
- bankruptcy,
- delayed payment.
It is widely available for everyday exports of goods. These marketable risks are defined in relation to safe, developed markets where private insurers are considered able to provide cover. Private insurers operate freely in the EU market under the general framework of EU insurance law. These specific risks cannot normally be insured by government-backed schemes, as they are covered by different rules.
Government-backed export credit insurance in the EU
Government-backed export credit insurance is provided or guaranteed by state export credit agencies (ECAs). This insurance covers two types: medium- and long-term exports, which involve repayment terms of 2 years or longer. Medium- and long-term are often linked to larger, complex projects such as aircraft orders or infrastructure. Unlike private insurers, ECAs cover political and commercial risks that private market would not cover, such as
- war,
- sanctions,
- currency transfer restrictions.
These are considered high-risk markets that the private sector generally avoids. Government-backed support is subject to EU State aid rules. In addition, with regards to medium- and long term exports, the international framework known as the OECD Arrangement applies, which provides a common understanding for the use of export credits and ensures a level playing field among its 11 (including the EU) participants (also known as “signatories”). Although it is conceived as a set of guidelines, the arrangement is mandatory for EU countries.
Warning
Remember to check if the provider is an official ECA or a licensed EU insurer.Private providers must be licensed as insurers in an EU country and operate under EU solvency rules. You can check this via your national insurance regulator (e.g. BaFin in Germany, ACPR in France).
Sample story
Anna’s export journey
Anna runs a small maker of industrial LED lighting in Germany that exports to mid-sized distributors across Europe and North Africa. She began by mapping which buyers she works with in and in which countries they are located. Realising most of her sales were long-term shipments, she sought quotes from private insurers and checked whether Germany’s export credit agency could help for potentially riskier markets as she expands her business. Anna applied online for the policy that best matched the needs of the export contracts she had in place. She can now export with more security and expand into new markets that would otherwise be inaccessible without official support.
Find out how export credit insurance works in your country: