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Exporting opens up attractive business opportunities, but also entails specific risks. How do you protect your cash flow when a foreign customer doesn't pay? L'export credit insuranceCoface is an essential tool for companies expanding internationally.
Export credit insurance policies: three options to suit your needs
To better understand the basis of this protection, explore the definition and development of credit insurance.
Police for one-off operations
For an isolated sale or a specific project, this formula is perfectly suited. It generally covers:
- A single transaction
- Expensive capital goods
- Complex services
Article R.321-1 of the French Insurance Code recognises this type of insurance as one of the branches of credit insurance (branch 14). This policy is characterised by an in-depth study of the risk and a premium calculated specifically for the transaction concerned.
The subscription contract
For companies that regularly export to the same countries, the subscription contract offers a more flexible solution:
- An initial framework contract
- Supplementary agreements for each operation
- Periodic guarantee updates
The case law of the Court of Cassation has confirmed the validity of these contracts and their legal nature as insurance (Cass. 1re civ., 23 June 1992, RGAT 1992, p.609).
The global policy
A complete solution for regular exporters, the global policy:
- Covers the entire export customer portfolio
- Combines short, medium and long-term guarantees
- Integrates commercial and political risks
This formula, referred to in article L.432-2 of the French Insurance Code, provides optimum risk pooling and simplified management.
Implementation of the guarantee
Terms and conditions
Article L.432-3 of the French Insurance Code states that "the State guarantee is granted after consultation with the Commission des garanties et du crédit au commerce extérieur". This legal framework benefits from gradual recognition at European level. A rigorous procedure that includes:
- Preliminary examination of the file
- Country risk assessment
- Analysis of the financial strength of the foreign customer
The guarantee can cover up to 95% of losses for political risks and 90% for commercial risks.
The role of the Guarantees Committee
This commission was set up by law no. 49-874 of 5 July 1949:
- Issues an advisory but decisive opinion
- Assess risks using a detailed analysis grid
- Proposes the pricing conditions for the guarantee
Its opinion is not required for day-to-day management transactions since the amending Finance Act no. 97-1239 of 29 December 1997.
State-Coface agreement
The law provides for a specific agreement to be drawn up between the State and Coface:
- Specify the accounting procedures
- Define the conditions for controlling operations
- Organising certification by the statutory auditors
This agreement protects the interests of policyholders. Article L.432-3 of the French Insurance Code guarantees that even in the event of financial difficulties for Coface, receivables arising from operations guaranteed by the State are preserved.
Compensation in the event of a claim
Types of damage covered
Export credit insurance policies cover:
- Direct losses (non-payment by the customer)
- Indirect losses (costs incurred in the performance of the contract)
- Material damage in certain cases
The political risks may include wars, revolutions, government decisions or natural disasters. The business risks mainly concern the insolvency of the debtor.
Calculation and payment of compensation
The calculation is generally as follows:
- Amount of unpaid debt
- Less the non-guaranteed portion (5 to 15%)
- Less costs saved by interrupting the contract
The compensation period varies from policy to policy, but is usually between 30 days and 6 months after the claim is made, depending on the complexity of the case and the type of risk involved.
Optimising your export cover: practical aspects
Don't neglect to study your target markets in advance. Statistics show that 65% of claims could have been avoided by a better analysis of country risk.
Prior approval from customers is crucial. According to Coface, exporters who systematically obtain their customers' approval record 40% fewer non-payments.
Beware of cover exclusions! The standard policy generally does not cover:
- Foreign exchange risks
- Contractual penalties
- Commercial disputes over quality
Check your insurance policy to understand the precise extent of your cover. Some clauses may considerably limit your rights to compensation.
Documentation of receivables is essential. Keep it rigorously:
- Signed order forms
- Proof of delivery
- Invoices and correspondence
Did you know that Coface, which regularly advises exporting SMEs, has data on more than 200 countries? This expertise gives French companies a substantial competitive advantage.
Our lawyers specialising in credit and insurance law can help you negotiate the best cover conditions and assist you in the event of a dispute with your insurer. Contact us for a personalised analysis of your export contracts and credit insurance policies.
Sources
- Insurance Code, articles L.432-1 to L.432-3 and R.321-1
- Law no. 49-874 of 5 July 1949 establishing the Guarantees Commission
- Amending Finance Act no. 97-1239 of 29 December 1997
- Nicolas, V. "Assurance-crédit interne et à l'exportation", JurisClasseur Droit bancaire et financier, Fasc. 800, 31 August 2005.
- Cass. 1st civ. 23 June 1992, RGAT 1992, p.609, note J. Kullmann
- Decree no. 94-376 of 14 May 1994 on the status of Coface
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