Study On The Risk And Optimization Of Export Credit Insurance Financing

Export credit insurance is widely adopted as a policy finance instrument by national governments, it is backed up by national finance, providing security of exchange collection, risk management and financing convenience, with the purpose of supporting the business activities of domestic corporations for export trade, overseas investment and external contract project. Export credit insurance is produced along with the foreign trade risks, benefiting from the approval of WTO, and has become an important finance instrument to encourage export by national governments.The function of export credit insurance is not limited to the loss compensation for overseas receivables of export corporation, due to this guarantee function, receivables can be transformed to assets with high security and liquidity, which would be a valuable mortgage when the bank provides trade financing with a lower threshold and fee. In practice, the trade financing based on the export credit insurance greatly reduces the corporation cost of financing operations, relieves financial pressure, benefits the promotion for export enterprises especially those medium and small ones. Meanwhile the insurance guarantees that first repaying source of financing is from the foreign buyer, therefore reducing the risk and becoming a welcome to banks. Nowadays, trade financing based on the export credit insurance is developing rapidly and expanding widely. Whilst the swift development, false trade appears frequently due to intricate trade patterns, and the insurance liability could not cover all the business so as to many problems in practice. Aiming at the aforesaid situations, it is a necessity to re-optimize the product design and operating process, so that it could better satisfy the financing demand of export corporations and guarantee bank loan security.Based on the analysis of the business model of export credit insurance financing, this paper states three kinds of risks, which may lead the aforesaid model to a failure: from exporters, from export credit insurance corporations and from financing banks. Specially, this paper emphasizes the risk related to false trade, its features, factors and prevention measures. With conclusion and summary on all the risks, this paper suggests to optimize the financing activities of export credit insurance in both range and depth aspects. Depth expanding means to delve the financing products deeper by detailing its patterns. Range expanding means to increase the types, enrich the product line under the existing product model. With the above optimization, it is about to intensify the risk management of existing financing model, increase the types, so as to facilitate the trade financing development and better support the export corporations and banks.