Export credit insurance

SUMMARY OF:

Directive 98/29/EC — export credit insurance for transactions with medium and long-term cover

WHAT IS THE AIM OF THE DIRECTIVE?

It harmonises different national official export credit insurance systems* to ensure there is no distortion of competition between EU companies.
It establishes common principles for insurance coverage, premiums, country cover policies and notification procedures.

KEY POINTS

The legislation applies to insurance cover for the export of goods and services. All institutions providing the cover, either directly or indirectly, must comply with its terms.
The risks covered may be commercial, political, manufacturing or credit-related.
Insurers are liable if the loss is directly or indirectly due to various causes such as a debtor’s insolvency or political or economic developments.
Insurers are not liable for any loss that may be due to factors such as:
- behaviour or omissions by the policyholder; or
- the failure of subcontractors to fulfil their obligations.
Claims should be paid without any delay, or, at the latest, within 1 month of the waiting period*.
Premiums should:
- correspond to the country, sovereign, public and/or private risk covered;
- reflect adequately the scope and quality of the cover granted;
- be able to cover long-term operating costs and losses.
Country cover policy should reflect an assessment of the risks involved, notably a country’s total outstanding exposure and/or the value of new contracts to be covered.
Notification procedures designed to ensure transparency in the system apply to:
- annual notification for information;
- notification for a decision;
- ex-ante and ex-post notification for information.
The legislation does not apply to insurance cover for:
- bids;
- advance payments;
- performance or retention bonds*;
- locally used construction equipment and material.

FROM WHEN DOES THE DIRECTIVE APPLY?

It has applied since 8 June 1998. EU countries had to incorporate it into national law by 1 April 1999.

* KEY TERMS

Export credit insurance systems: these protect an exporter of products and services against the risk of non-payment by a foreign customer. In giving the exporter conditional assurance that payment will be made if the foreign buyer is unable to pay, they reduce the payment risks associated with doing business abroad.

Waiting period: the period of time set for the covered risk to materialise.

Performance or retention bonds: bonds that protect a customer once a job or project is completed. They guarantee that the contractor will do any work needed to remedy defects discovered immediately after completion of the contract, even if the contractor has been fully paid.

MAIN DOCUMENT

Council Directive 98/29/EC of 7 May 1998 on harmonisation of the main provisions concerning export credit insurance for transactions with medium and long-term cover (OJ L 148, 19.5.1998, pp. 22-32)

Successive amendments to Directive 98/29/EC have been incorporated into the original text. This consolidated version is of documentary value only.