Full cover for exports of capital goods extended

KUKE has decided to extend the option of providing 100% insurance cover for exports of capital goods in response to the persistently high risk in international trading and the uncertainty about the financial situation of foreign counterparties resulting from the still fragile economic situation of many countries.

KUKE introduced such a solution in mid-March last year, when the sweeping coronavirus epidemic started to globally upset business activity and investments. Entrepreneurs from different sectors took advantage of this solution.

"e initially provided 100 percent cover for investment export projects until the end of 2020. And despite the fact that the situation has slowly began to stabilise and the economic prospects for the world have started to look brighter, it only seems right to extend this support for Polish firms operating on foreign markets by continuing to provide such solutions until the end of the year. This means that KUKE, by insuring various kinds of investment transactions, is assuming all the risks entailed, both trade and political. In consequence, the Polish exporter now has much easier access to refinancing of contracts or financing for its own counterparties using credit facilities provided by banks, with maturities of two years and longer", Piotr Maciaszek, Director of the KUKE Department of Insurance and International Cooperation, explains.

The former practice in this respect at KUKE was to require sharing the trade risk at a level of at least 5 percent of the insurance sum. It is common for investment contracts to be worth many millions of euro, which is why any share in the risk can be acutely felt from the point of view of the execution of the export transaction.

"The global meltdown caused by the pandemic led to the slowing of most transboundary projects and investments on foreign markets, and destabilised global exports. Polish exporters of capital goods who applied for KUKE insurance were also less active. Nevertheless, we still managed to successfully provide support to contracts in African markets and in Eastern European countries, which included 100% risk assumption. This year, we can expect a rebound in these types of transactions due to the greater optimism of entrepreneurs; although one must not lose sight of the fact that the risk still remains very high on many markets", Piotr Maciaszek emphasises.

The main aim of this extension of insurance protection is to support banks in their continued financing of investment export projects. KUKE assumes all of the transaction risk involved, thanks to which banks will not have to establish reserves related to their own share in the risk.

Export projects relating to investments in KUKE’s portfolio mainly consist of turnkey construction service projects, the supply of machinery, production lines, and means of transport, and the broad shipbuilding industry. The acquisition or contracts in such sectors is strictly linked to securing financing from banks, which has been limited during this period of uncertainty in the global economy.

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