Export credit insurance

In the good old days, when as a student, you still got a basic grant that was more than enough to have a monthly budget left over after paying the rent on your room, I studied general economics for six years. I took a bit longer than necessary, because, well firstly because you just did, secondly because I was going to do an internship and then work at the Ministry of Economic Affairs, and thirdly because I did quite a few extra subjects. Oh yes, and fourthly because I found some exams say so interesting that I took them twice. In those six years of extra subjects, a couple of centuries of accumulated economic intelligence have been poured over me. But as a young PhD student, I had never heard of export credit insurance. Intriguing word actually, it consists of no less than three nouns stuck together. Let's zoom in on that.

Export

Exports: I knew that as a general economist. In high school, I learned already in the equation I can still recite even at night - Y=C+I+O+E-/-M - that exports are a major contributor to our national income. In university, I learned about Ricardo, Heckscher and Ohlin, Balassa and half a football team. But looking back on all that wisdom now, I realise that export was an abstract and model-based concept like the E in the formula. In Atradius' day-to-day business, however, it is a contractor employing people thousands of kilometres away to build foundations for wind turbines. Or people devising and screwing together a waste separation plant in a factory. Much more interesting! We at Atradius support exports and then, of course, we need a definition of what exports are. That definition is deliberately very broad: only 20% of the added value of a contract we insure has to come from the Netherlands. Dutch companies operate in a single market and are traditionally internationally oriented.

Credit and insurance become even more difficult for me. I come more from macroeconomics and especially public finance - if you are ever looking for someone to come to a party and give a 30-minute semi-comic treatise on budget rules and their sense and nonsense, I am your man - and I was barely at home in finance when I started working. I admit it frankly: there was a course on financial innovations like derivatives that I just dropped after two failed exams because, as already mentioned, I had enough credits. That course was also about Euribor and libor and so on, so if I had known then that almost 30 years later I would be in an internal working group on the libor substitution I might have watched less cycling (or drank beer, but of course I am not allowed to mention that in a blog I write for my work) and studied the book one more time...

Insurance

First about insurance: so we do. In a nutshell, we ensure either payment risks associated with foreign customers of Dutch exporters or working capital for those Dutch exporters. Without making it complicated: we also have a distinction between insurance and (counter)guarantees. Legally a relevant difference, but don't worry about that, we can explain it. By the way, my absolute favourite product is a guarantee: the export credit guarantee. But that takes us too far now.

Then those credits. That sounds like something from a bank. Often it is, especially in the larger export transactions. An exporter enters into a contract with a foreign buyer, and a bank provides a credit from which the exporter is paid and which the buyer then repays over a relatively long period of time. We then insure the risk that something goes wrong with that repayment, which firstly makes the bank willing to provide that credit at all and secondly will charge a much lower interest rate than without insurance. Buyer happy, exporter happy (because of a competitive offer), banks are happy and the bv-Netherlands are happy because of employment.

Credit

But that credit does not have to come from a bank. It can also come from an exporter himself, who allows the foreign buyer to spread the payment over time where we can again insure the risk. Usually, this is done with so-called bills of exchange, about which more in another blog. For smaller amounts, this can be a very good solution. For the exporter, it can be inconvenient that he has to wait longer for his income, but we can help with that too. In fact, we have products that allow you to have those bills - at a discount - paid out earlier, either by a bank or by ourselves. Take a look at our product page for the possibilities and contact us!

So behind those three nouns that sum up our work, there is a whole world. A fascinating world that has never bored me for a moment in the ten years I have been walking around in it, quite the contrary. Actually, I should just stand in front of those classes of students and tell an inspiring story about the real world of exports, the risks and the solutions. For someone who can even give a 30-minute conference on budget rules, that should be a piece of cake.