Offering credit terms helps you win orders, especially in Europe and North America where open account is common. But if a buyer does not pay, the loss can wipe out a year's profit. Export credit insurance lets you offer credit while protecting the payment.
ECGC Ltd (formerly the Export Credit Guarantee Corporation of India) is a Government of India company under the Ministry of Commerce and Industry. It insures exporters against non-payment caused by commercial risks, such as the buyer going insolvent or failing to pay, and political risks, such as war or restrictions on sending money out of the buyer's country. It also sets credit limits on individual buyers and provides cover to banks that lend to exporters.
What export credit insurance covers
Commercial risks
- The buyer becomes insolvent
- The buyer fails to pay within the agreed time after accepting the goods
- The buyer refuses to accept goods that were shipped as agreed, where the exporter is not at fault
Political risks
- War, civil war or unrest in the buyer's country
- Restrictions that stop the buyer from sending payment out of the country
- New import bans or cancellation of import licences
Insurance does not cover losses caused by disputes about quality, or by the exporter not meeting the contract. Policies normally cover a large share of the loss, not the full amount, so you still carry some of the risk.
Buyer credit limits
Before you ship on credit, ECGC assesses the buyer and sets a credit limit: the maximum amount it will cover for that buyer. This check is useful on its own, because it tells you whether a large, independent organisation is willing to back the buyer's ability to pay.
Cover for exporters and for banks
ECGC offers policies to exporters, covering their shipments on credit terms, and separate cover to banks that give export finance. Bank cover makes it easier for banks to lend packing credit and post-shipment finance, particularly to smaller exporters. Policy types, premium rates and claim rules change from time to time, so check the current terms on the ECGC website or with an ECGC branch.
When should you take export credit insurance?
- When you sell on DA or open account terms
- When a single buyer accounts for a large share of your sales
- When you export to countries with higher political or currency risk
- When your bank asks for it as a condition of export finance
For orders paid fully in advance or under a confirmed LC, insurance is usually less necessary. Our guide to export payment terms compares the risk of each method.
Making a claim
Policies require you to report a payment default within a fixed time, keep the insurer informed, and take reasonable steps to recover the money. Missing a deadline can reduce or cancel the claim, so diarise the due date of every insured shipment and act as soon as a payment is late.
Frequently asked questions
What is ECGC?
ECGC Ltd is a Government of India company under the Ministry of Commerce and Industry that provides export credit insurance to exporters and cover to banks that lend to exporters.
Does ECGC cover the full invoice value?
Usually not. Policies cover a large share of the loss, and the exporter carries the rest. Check the percentage in your policy.
Does ECGC cover quality disputes?
No. Credit insurance covers non-payment for commercial and political reasons, not losses caused by disputes over the goods or the exporter's own breach of contract.
Are there private alternatives to ECGC?
Yes. Several private insurers offer trade credit insurance in India. Compare cover, premium and claim terms before choosing.
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