1. Credit Risk Insurance Overview

2. CREDIT RISK INSURANCE • What It Is and Is Not • How Does It Help • Underwriting Philosophies • Policy Types • Avoid Documentary Pitfalls Associated with Claim Perfection • Benefits to Exporter and Foreign Buyer

3. Globalization • More Aggressive Sales Strategy • Higher Risk Emerging Markets • Financing – Key Purchasing Consideration • Increased Credit Exposures

4. What is Credit Risk Insurance? Protection of A/R from 2 Default Triggers: • Commercial Default Insolvency; Devaluation or, Protracted Default • Political Default Transfer Risk; Arbitrary Government Action; Civil Unrest

5. What It Is Not • A Tool to Make a Bad Credit Good (It renders a good credit acceptable in a high risk market)

6. How Does Credit Risk Insurance Help? • Enhance Competitiveness • Enhance Financing Options • Enhance Protection Against Payment Default

7. CREDIT RISK INSURANCE • Purpose: Expand sales, Improve financial options and mitigate payment risk • Exploit Payment Risk to Competitive Advantage • Covers: Commercial and /or Political Risks • Does Not Cover: Product disputes or contract cancellation • Conditional: Claim payment will be made only if insured can demonstrate conformity to the policy’s terms and conditions

8. Who Uses Credit Insurance • Western Europe – 83% of World Market (Germany/26%, France/18%, U.K./13%) • Rest of World – 17% of which North America uses only 6%

9. U.S. Firms Typically Insure • Finished Goods • Work in Progress • Buildings/Equipment • People

10. Accounts Receivable Portfolio • A/R is your 2nd most fluid asset after cash • Timed Payment Obligations • Yet, > 94% of open account sales in US are uninsured

11. POLICY TYPES Credit Risk Ins. • Short-termMulti-Buyer (or SingleBuyer) • Medium-term Single Buyer • Leasing (Operating or Financing) • Bank L/C

12. STANDARD MULTI-BUYER POLICY • MultipleSales, Buyers, Countries • Short-term: 30 – 360 Days / 12-month period • Annual Deductible • Spread of Risk (all open account sales) • Premium Based on Risk/Exporter Experience • Ledger & Credit DCLs Available • Coverage: 90% to 100% • Assignable

13. Short Term Single Buyer • Short-Term (30 - 360 Days) • 12 Month Policy Period • One or More Shipments • Premium Rate Schedule (Exim) • Negotiated Premiums (Private Sector) • Minimum Advance Premium Payments • No Deductibles / Assignable

14. Medium Term Policy • Term: 1-7 years (Export-Import Bank) • 15% Down (Other Restrictions Apply) • Comprehensive Coverage • Focus is more on Foreign Buyer Obligation • Relatively Short Processing • Private Sector Programs Available (AIG, EIC, FCIA, Unistrat, Zurich)

15. Evaluating an ApplicationMajor Items Needed • Financial Statements • Sales Volume - Domestic & Intl • Average A/R Balance • 3-year Loss History • Analysis of Credit Procedures • Financial Information on Top Tier Buyers - Financials, Bank & Trade References, Favorable Credit Agency Reports • Desired Credit Limits • For Export Programs, sales by country breakdown

16. Pricing Based On • Country Risk • Industry Risk • Buyer Risk • Terms of Payment (the more liberal your terms, the less quality in your A/R – time increases uncertainty of payment ) • Loss Record • Deductible (losses/sales X projected sales)

17. Benefits to Exporter • Enhance Overall Competitiveness • Contribute to Bottom Line • Improve Cash Flow • Reduce DSO • Lower Loss Reserves • Increase Collateral Base & Borrowing Power • Mitigate Chances of Payment Default • And, Premiums are Tax Deductible

18. Benefits to Foreign Buyer • L/C Costs Avoided • Not Forced to Borrow Locally • U.S. Interest Rates • 100% Financing of Short-Term Credits

19. Replace Letters of Credit • L/Cs do Not guarantee payment • L/Cs require expertise • L/C may cost the sale • L/Cs tie up buyer’s funds or credit • Insurance eliminates high local int. rates • Insurance eliminates buyer’s bank fees • Insurance builds customer loyalty

20. List of Insurers • ACE • AIG • Atradius • Coface North America • Euler Hermes (ACI) • Export-Import Bank of the USA • FCIA • HCC • Zurich