Indian exporters will be forced to shell out at least 10 to 20 per cent additional cost for credit insurance protection in the next fiscal.
The worldwide economic slowdown, which has seen many buyers (read importers) not paying their dues, has resulted in claim ratios more than doubling to over 70 per cent for the global credit insurance industry.
The French-based Coface SA -- one of the three specialised credit insurance players -- proposes to hike the premium by 10 to 20 per cent. This, stated the global insurance company's regional managing director Bart A Pattyn, "will bring down the claim ratios to 50 per cent, and make up for the deficits".
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There are three specialised players in the field of credit insurance including Coface, the German-based Gerling Credit Insurance Group and the Allianz group company, Eurler Hermes.
The global recession intensified after the September 11 attacks in the US. "A significant part of the world economy is in recession and claim ratios have noticeably increased. Off late, we have seen some stability as consumers have started buying for Christmas. But there is still a clear slowdown," said Pattyn. Premiums were last increased in the late 90s following the Asian crises.
Around two per cent of all global transactions are not paid by buyers. This results in claims, which are purchased by specialised credit insurance companies like Coface that also offers debt purchasing contracts.
"Around 65 per cent of the claims are recuperated and the balance is written off, which is the loss claim ratio," said Pattyn.
Credit insurance companies take a view on the credit risk of importers. As claim ratios shoot up these insurers downgrade the 'defaulting' buyers and do not offer any line of credit cover.
It is thus in the interest of the buyer not to default on payment as the credit insurance companies would otherwise 'black list' these companies.
With banks being the largest buyers of credit insurance information, buyers will fail to get access to credit lines.