Coface and export credit insurance: a practical guide for exporters

Navigating the stormy waters of international trade without adequate protection exposes your company to considerable risk. For a in-depth understanding of credit insurance, from its definition to its legal nature and evolutionIt's time to take a closer look at the specific features of export credit insurance. Export credit insurance is an essential shield for French companies seeking to conquer foreign markets.

Coface, a pillar of French foreign trade

The Compagnie française d'assurance pour le commerce extérieur (Coface) occupies a strategic position in France's export support system. It covers the commercial and political risks to which French companies are exposed internationally.

Genesis and metamorphoses of Coface

The initial failure of private initiatives

In the 19th century, the first private credit insurance companies quickly went bankrupt. Their insufficient cash flow meant they were unable to absorb the risks inherent in international transactions.

Towards the middle of the 19th century, the banking sector tried to fill this gap by creating dedicated structures. In 1927, several insurers joined forces to found the Société française d'assurance pour favoriser le crédit (SFAC), now part of the Euler Allianz group. But these private attempts always came up against the scale of international political and economic risks.

The birth of Coface under the aegis of the State

Coface was created by Act no. 45-015 of 2 December 1945, known as the Credit Nationalisation Act. As the document states, Coface was set up at a time when "the government could, by decree, take all measures aimed at improving credit and credit insurance conditions necessary for the development of France's foreign trade"..

Coface was given a monopoly on foreign credit insurance, replacing the credit insurance department of the Ministry of the Economy. This coincided with the nationalisation of the Banque de France and the creation of the Banque française du commerce extérieur (BFCE).

The current structure of Coface

The 1994 reform

Decree 94-376 of 14 May 1994 radically changed Coface's status. Article R. 442-1 of the French Insurance Code now provides that Coface, which has majority private capital, may manage guarantees granted on behalf of the State.

There were several reasons for this development:

• Compliance with European rules on free competition
• Adaptation to the directive on the freedom to provide services
• Opening up capital to private investors

A dual role

Coface currently operates in two distinct forms:

1. For its own account It assumes credit insurance risks in the broadest sense of the term, and ensures the successful completion of export trade transactions. It complies with the regulations applicable to private insurance companies.
2. On behalf of the State Under article L. 432-2 of the French Insurance Code, Coface may be granted a state guarantee for various export-related transactions. In this role, Coface acts as a service provider under State control.

Guarantees offered by Coface

La range of risks covered by Coface is vast:

• Commercial risks Financial failure of private buyers
• Political risks war, revolution, social unrest, nationalisations
• Currency risks unfavourable exchange rate fluctuations
• Catastrophic risks Major natural events
• Extraordinary risks exceptional circumstances affecting transactions

Coface can also guarantee exporters against losses resulting from expenditure incurred in prospecting foreign markets or building up stocks.

How can I obtain a Coface guarantee?

Award procedure

Under article L. 432-3 of the French Insurance Code, the State guarantee is granted after consultation with the Commission des garanties et du crédit au commerce extérieur, set up by article 15 of law no. 49-874 of 5 July 1949.

The amended Finance Act No. 97-1239 of 29 December 1997 set out the practical details:

1. Coface provides for separate accounting records for transactions carried out with the State guarantee.
2. An agreement between the French State and Coface sets out the terms and conditions of this registration.
3. Auditing is carried out by statutory auditors

Practical details

For exporters wishing to benefit from a Coface guarantee, several steps are necessary:

1. Presentation of the export project
2. Risk assessment by Coface
3. Determining the right type of cover
4. Setting tariff conditions
5. Signature of the insurance contract

Disputes and jurisdiction

In the event of a dispute between Coface and one of its clients, only the courts have jurisdiction, as the Court of Cassation pointed out in its ruling of 11 November 1992 (Cass. 1re civ., 11 Nov. 1992: Bull. civ. 1992, I, no. 279).

This point deserves the full attention of insured companies. Despite the public nature of some of Coface's activities, disputes are governed by private law rather than administrative litigation.

Exporters often wrongly assume that the administrative court has jurisdiction when Coface is acting on behalf of the State. This confusion can lead to damaging procedural errors.

Strategies for optimising your cover

Three types of insurance policy are generally offered:

1. Specific policy for a one-off operation (heavy equipment, major study contracts)
2. Subscription for regular operations (framework contract with periodic updates)
3. Global policy for mixed operations (long-term with occasional and regular operations)

The choice between these formulas depends on the nature of your exports and your international commercial strategy.

Having the right legal support when negotiating these insurance policies can make all the difference in the event of a claim. The subtleties of the contract determine the real extent of your protection.

Our law firm specialising in international business law can help you secure your exports by optimising your Coface cover. We regularly assist companies in their dealings with Coface and defend their interests in the event of a risk.

Sources

• Insurance Code, articles L. 432-1 to L. 432-3, R. 442-1 and R. 442-2
• Law no. 45-015 of 2 December 1945 (credit nationalisation law)
• Decree no. 94-376 of 14 May 1994 amending the Articles of Association of Coface
• Supplementary Finance Act No. 97-1239 of 29 December 1997
• Cass. 1st civ. 11 November 1992, Bull. civ. 1992, I, n° 279
• Law no. 49-874 of 5 July 1949, article 15 (Commission des garanties)
• Fasc. 800: Domestic and export credit insurance, JurisClasseur Droit bancaire et financier