Coface In The News : Propelling Exports Through Trade Credit Insurance - Global Trade Magazine
February 19, 2015 – When Trilithic, Inc., an Indianapolis manufacturer of test and measurement equipment, started to export 12 years ago, the company’s commercial bank required it to insure its overseas receivables to collateralize those assets against its line of credit. Trilithic procured such a policy from the Export-Import Bank of the United States (Ex-Im). Though the company now ships 40 percent of its products overseas and is no longer required to carry trade credit insurance, it still maintains its policy with Ex-Im.
Air Tractor Inc. of Olney, Texas, was in a different position. The manufacturer of agriculture and firefighting airplanes exports 50 percent of its products under terms that require customers to pay off the aircraft in five years. To receive its money quicker by selling those loans to U.S. commercial banks, Air Tractor insures the loans through Ex-Im.
“We first vet customers internally to determine whether they are good credit risks,” says David Ickert, vice president of Finance for Air Tractor. “If Ex-Im’s underwriting committee responds affirmatively, we pay a premium and Ex-Im issues an insurance policy for that loan. We then have the ability to sell that loan to a U.S. bank and that lets us roll our cash.”
Trade credit insurance allows exporters to offer competitive terms of sale without insisting on up-front cash or receiving cumbersome and time-consuming letters of credit. Credit insurance protects accounts receivable against customers who can’t pay due to insolvency, political risk, exchange-rate fluctuations and a host of other factors. Policies are available from private-sector credit insurers such as Atradius and Coface as well as from Ex-Im.
Atradius and Coface underwrite trade credit insurance by accessing a database on millions of companies around the world. “But this information has to be put in context,” explains Kerstin Braun, executive vice president at Coface North America. “Some customers’ balance sheets may look iffy but our specialists can put it in the perspective of the buyer’s country.”