About country risk assessment

For each guarantee application, EKN makes an assessment of the risk of non-payment in the associated transaction. This risk assessment involves an assessment of the country risk and the credit risk of the other party, and also a transaction-specific risk. The premiums for EKN’s guarantees are based on this assessment of country and counter party risk.

How does country risk assessment work?

Country risk assessment is mainly about assessing a country's ability to transfer currency for foreign payments. This ability is determined by a number of different circumstances which can be grouped as political, economic and financial factors. The country risk assessment involves weighing and assessing these factors in order to come to a conclusion about a country's ability to pay. The country risk assessment also includes consideration of the risks of action by public authorities or how the business environment may affect an individual transaction in the country under consideration – factors which may play a key role in the assessment of the individual transaction.

The country analyses are based on comprehensive source material from bodies which include the International Monetary Fund (IMF), the World Bank, credit rating agencies, consulting firms and guarantee agencies in the OECD. EKN also actively participates in the OECD's annual risk classification of over 140 countries. This classification is used to define the minimum premium for guarantees for each country.

The country risk assessment is expressed in a country policy

The country risk assessment results in a country policy in which EKN expresses the basic guidelines that we use for issuing guarantees for different countries. We keep our country policies constantly updated. These are based on EKN’s own perception of risk and on the minimum premium levels that are determined within the OECD collaboration.

The policies contain premium information expressed in the form of country risk categories. The country risk categories are on a scale of 0 to 7. The lower the number, the better the country's creditworthiness. The policy also provides information about EKN’s ability to issue guarantees. This ability is described using the expressions 'normal risk assessment', 'restrictive risk assessment' and 'normally off cover'. 

EKN's ability to issue guarantees for a country may differ for different types of risk in that country.

EKN divides these as follows:

  • sovereign risk
  • other public buyers
  • banks
  • companies

EKN’s risk assessment may for example have a higher requirement for sovereign risks but normal risk assessment for other types of risk.

If no policy has been determined for a country, this is marked with a line. 

Temporary solution during the Covid 19-crisis

EKN can temporarily, until the end of 2020, guarantee also short-term supplier credits to high-income countries. These transactions, shorter than two years, are normally insured by the private credit insurers. Because of the Covid-19 crisis, EU has decided to allow also Export Credit Agencies like EKN to cover them.

Document

Country Risk Categories per 2 July 2020