Export insurance: What are the options?
A brief guide to protecting your products on their overseas journey
There are many risks involved in the exporting process, and many of them are fiendishly tough to manage. It’s hard, for example, to fully guarantee a customer will pay you, or meet the timescale you have agreed for payment; it’s also difficult to ensure that your goods will reach the customer without a hitch, given they are being shipped and stored by third parties.
Export insurance is designed to assuage these risks, and give you a backstop against problems which crop up during the exporting process.
Types of export insurance
There are many types of export insurance available. Broadly speaking, however, they address the following key eventualities:
- Physical loss or theft of goods
- Damage of goods in transit
- Delay of shipment
- Not being paid
- Political or economic instability in your customer’s country
- Changing exchange rates
Chances of success
There are four main factors which affect your chances of making a successful claim:
Acceptable risk. If you’re shipping a flimsy or fragile product, using a disreputable company or doing business with a firm which appears to be dodgy, you may struggle to get a payout.
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Severity of the problem. Put simply, the more money you have lost, the more likely the insurers are to uphold your claim.
Number and frequency of claims. If you’ve made several claims in the recent past, the insurer may think you are not conducting your business with sufficient diligence, and take a dim view on your current claim.
Your experience. If you’ve been exporting goods for years, and have in-depth knowledge of what the process involves, the insurer may feel you should have known better, and understood the risks more clearly.
How and where to get a policy
If you’re looking for insurance against non-payment, it’s best to contact the Export Credits Guarantee Department (ECGD), the UK’s official export credit agency. The ECGD can insure you against non-payment, guarantee customers’ bank loans and provide support and compensation in the event of political turbulence in your customer’s country.
The ECGD’s export insurance policy gives the exporter up to 95% coverage, and covers a host of specific emergencies. Provided you are based in the UK, exporting overseas and shipping goods valued at £20,000 or more, you can apply for ECGD coverage – and there is no charge attached to the application. Visit www.ecgd.gov.uk for more information.
If you want insurance for other eventualities, or to cover the cost of raw materials during the pre-shipping stage, you’ll have to contact a private insurer, or an international bank. The ECGD may be able to help, but their assistance is not guaranteed – it really depends on the individual case.
For additional info about the various policies available, and the criteria associated with them, visit the UK Trade and Investment website – www.ukti.gov.uk.