Increased activity in international cooperation
The financial crisis meant intensified cooperation between the Berne Union (the export credit industry association), the OECD and the EU. The difficulty of covering risk in the private market is a current issue in the EU.
During the year, the financial crisis made its effects clearly felt in the area of financing and insuring against risk in transactions. Discussion in international fora largely covered ways of alleviating the situation.
Berne Union predicts continuing rise in demand
As the global financial crisis escalated in October, the 50 members of the Berne Union gathered for their annual meeting in Canada. The members expressed the view that export credit agencies should be part of the solution, by promoting cooperation and stability. In this global network, we can give each other early indications about problems in the buyer countries, sectors or projects. This can play a crucial role in preventing or minimising losses.
Most members expected to see increasing demand for their products – particularly those linked to financing banks. Many also saw the need to develop new insurance solutions.
Another topic on the agenda at the meeting was corporate social responsibility. The Berne Union has developed guidelines which act as a common set of values. Members regularly exchange their experiences of applying these guidelines and their policies. Issues relating to the promotion of green projects and climate were also discussed.
OECD countries and non-members pledge support
At the OECD export credit meeting in November 2008, the main topic of discussion was the effects of the financial crisis on financing exports. The OECD countries and a number of non-member countries were united in pledging continuing support for exporters and banks. Export credit agencies play an important stabilising role by keeping risk capacity high in order to maintain international trade flows. The meeting also highlighted the importance of respect for sound principles in underwriting and international regulations.
At the annual consultation meeting, exporters’ and banking organisations expressed a wish for temporary exemptions from OECD's rules. Discussions on more concrete measures within the OECD to facilitate implementation of export transactions continue. However, to date only minor amendments have been made to the project financing regulations.
Marketable risks topical in the EU
Exporters in EU countries have reported a more difficult climate for insuring risk in export transactions in the private insurance market as a result of the financial turmoil. EKN has also noted high demand for guarantees for marketable risks, i.e. short-term credit risk for transactions within the OECD and EU. In accordance with EU’s competition rules, this type of risk is not covered by official export credit agencies as the agency must not compete with the private market. However, with the present financial turmoil, it is proving difficult for companies to cover these risks on the private market.
The EU Commission has drawn attention to the problem and has (in a package of measures for temporary exemptions regarding state support) decided to establish an easier procedure for member states to request exemption. EKN welcomes this development and is collecting documentation from exporters, which will be required to demonstrate the problems and obtain exemption authorisation.
EKN on site in New Zealand
It is not unheard of for the more experienced guarantee agencies in the world to share their experience and expertise with newer and often smaller organisations. During previous years, EKN has been able to help the Czech Republic, Poland, Estonia and Iceland build up their guarantee agencies. For just over three years, EKN has had a large cooperation agreement with the New Zealand guarantee agency the New Zealand Export Credit Office (NZECO). EKN makes risk assessments and acts as an adviser in guarantee techniques and settlement of claims. For three months of 2008, EKN’s Head of International Cooperation Anne Abrahamson was on-site in Wellington, New Zealand, to offer NZECO support in its development.