Credit insurance

Insurance for banks related to lending to export customers and discounting of export supplier credit

Supplier Credit Insurance
(Facility S)

This medium-/long-term credit insurance covers the credit period following the fulfilment of the export sales contract. Cover may be granted for the buyers’ payment risk, risk of a letter of credit opened in favour of the exporter, risk of promissory notes or payment risk of a bank guarantee. Facility S is ideal for exporters requiring a bank loan for post-shipment financing.

Supplier Credit Discounting Insurance
(Facility Kv)

MEHIB offers this product to banks engaged in trade / structured financing.

The object covered by the KV-facility insurance is the bank’s receivable purchased from a Hungarian exporter, originating from a medium or long-term supplier’s credit facility related to a foreign trade contract. The insured is the bank purchasing the receivable, or in the case of a bank consortium, the lead member of the consortium.

The KV facility offers the insured bank the same insurance cover as the buyer’s credit insurance facility, so as to ensure that even in the event of unsatisfactory performance by the exporter or a commercial dispute, it will receive its indemnity payment from MEHIB, in respect of the suppliers’ receivables that it purchases, if it incurs damage due to the occurrence of an insured event.

MEHIB has elaborated the terms and conditions of this product to ensure that, based on the Basel II capital allocation guidelines, the risks of the commercial transaction and of the financing are separated from each other. MEHIB assumes the performance risk, while stipulating its right to enforce a recourse claim against the exporter, as the most important condition of the insurance.

The insurance cover extends to both the commercial and the political risk.

The insured is liable for the deductible of 5% of the amount of damage incurred.

The grace period for indemnification is ninety days from the occurrence of the damage. The indemnification grace period is not applied where the insured event is the insolvency of a private debtor.

Buyer Credit Insurance
(Facility V)

This medium-/long-term credit insurance (risk period: 2 years +) covers the credit period following the fulfilment of the export sales contract. The facility covers the payment risks of loans granted by banks to foreign buyers or banks for the purchase of goods of Hungarian origin. The insurance covers claims arising from the loan agreement, i.e. the actually granted loan amount and, the interest.

Manufacturing Risk Insurance
(Facility G)

Facility G covers the risks during the pre-shipment period of medium and long-term transactions. It can also be applied as a supplemental insurance for applicants and/or policyholders of supplier credit insurance (Facility “S”) or of buyer credit insurance (Facility “V”). The policy serves as a security for banks in case of export pre-financing. The insurer will pay the accounted HUF (Hungarian Forint) costs arisen in connection with the performance of the underlying export sales contract.

Export Receivables Insurance
(Facility C)

This facility covers exporters’ risks connected to their short-term, typically unsecured and open account transactions with deferred payment to non-OECD countries. This way the facility allows the exporter to be covered against losses caused by the buyer’s economic situation as well as against country risks beyond the partner’s control. This insurance is guaranteed by the state budget, consequently facility C can only be concluded for the export of products with a Hungarian certificate of origin. The facility covers both the risk of the manufacturing and the credit period.

Factoring Insurance
(Facility CF)

The facility insuring purchased debts has been developed for factoring companies and financial institutions. It provides cover for purchased debts with a maximum credit period of 360 days.

Insured commercial risks are insolvency and protracted default of the buyer of the commercial transaction. Additionally cover can be extended to political risks of the buying country.

The policy works on a whole turnover basis, i.e. it covers payment risks of all purchased debts. Coverage is provided either on the basis of the amount of turnover or on the total outstanding debts.

Investment Insurance
(Facility B)

MEHIB’s investment insurance facility provides cover for country and political risks, in respect of the capital invested in a foreign enterprise, and the return on such investment.

Invested capital is defined as any cash contribution to the equity of the foreign enterprise, any similar, non-cash contribution, the consideration paid for acquiring ownership of a foreign enterprise, an owner’s loan granted to the foreign enterprise, or a payment commitment, specified in the statutory provisions, undertaken by the owner to enable the foreign enterprise to take out a loan.

The return on investment from a foreign enterprise is defined as the dividend or profit share originating from the foreign enterprise, the interest accrued on an owner’s loan, and any other income originating from a capital investment made under the law of the country in which the foreign enterprise has its registered office.