Insurance Broker: Ex-Im Provides Support Not Available In The Private Sector
Meridian Finance Group – Santa Monica, Calif.
Gary Mendell, President of Meridian Finance Group in Santa Monica, California, knows the Export-Import Bank of the United States as well as anyone. Meridian brokers more Ex-Im Bank export credit insurance policies for U.S. exporters than any other company in the country.
Credit insurance policies protect exporters’ foreign receivables against nonpayment risks. Beyond giving exporters the confidence to extend competitive payment terms, credit insurance is a sales tool that helps U.S. exporters expand their international market share and is a financing tool that enables them to get loans from banks and other lenders.
U.S. exporters—and to an even greater extent their competitors in other countries—make widespread use of credit insurance to help them succeed in global markets. As in the U.S., credit insurance is available abroad from both private-sector insurance companies and government-supported export credit agencies such as EDC (Canada), Hermes (Germany), SINOSURE (China) and others.
Most of Meridian’s credit insurance business is underwritten by insurance companies in the private sector rather than Ex-Im Bank. Meridian generally looks first to the private sector to address U.S. exporters’ credit insurance requirements. For many exporters, however, particularly small-business exporters, Mr. Mendell says the best solution—and in some cases the only solution—is credit insurance from Ex-Im Bank. Here’s why:
MINIMUM PREMIUM: Private-sector insurance companies require exporters to pay deposit premiums in advance to obtain a credit insurance policy. While Ex-Im Bank’s premium rates are higher than those of most insurance companies (since Ex-Im Bank does not compete with the private sector), Ex-Im Bank offers its coverage on a pay-as-you-go basis, which is more manageable for a small-business exporter that’s just beginning to grow its international sales.
BUYER UNDERWRITING: Regardless of the price, credit insurance works only if the insurer is willing to underwrite an exporter’s foreign customers. When foreign companies are unable to provide financial statements that are up to U.S. standards, credit insurers need to rely on alternative sources of information. While private-sector insurance companies exhibit some flexibility in this regard, Ex-Im Bank offers a clearly-defined framework under which exporters can submit trade references, ledger experience, credit reports, and other information to get their smaller international sales covered.
EMERGING MARKETS: Coverage is available from private-sector insurance companies for exporters doing business in developing countries if the exporter’s portfolio of receivables is large enough to provide a broad spread of risk and/or at the cost of a significant deductible on the insurance policy. Newer and smaller exporters simply don’t (yet) have a varied book of business, and in many cases would be unable to absorb the cost of a big deductible. Ex-Im Bank insures U.S. export sales to even the highest-risk markets without requiring large portfolios, broad spreads of risk, or big deductibles.
In principle any insurance company in the private sector could do what Ex-Im Bank does. But despite a growing number of insurers offering export credit insurance, none of them offer programs with the above kinds of features which may be essential to the success of U.S. exporters, particularly small businesses and growing exporters.
U.S. exporters that expand their international sales can, and often do, graduate from Ex-Im Bank programs to more-commercial, less-expensive private-sector credit insurance policies. But those companies never would have been able to get into the business of exporting nor have grown their foreign sales in the first place without the support of Ex-Im Bank.