ECGC sees rise in claims on US crisis

State-owned Export Credit Guarantee Corporation of India (ECGC) has seen an increase in insurance claims by exporters as defaults rise in the US.

According to the latest available data, ECGC has cleared claims of Rs 180 crore between April 2008 and March 12, 2009, under the export credit policy as against Rs 119 crore in 2007-08. During the financial year up to March 12, claims related to export shipments to the US were estimated to have gone up nearly three times to Rs 101 crore compared with Rs 35 crore in the corresponding period last year.

Among the sectors, textile was the worst hit, with the agency settling nearly half the claims related to this segment.

Export credit policy covers risk arising from political and commercial environment. Exporters buy credit covers to safeguard their payments against the default of buyers on account of the risk existing in the countries they are exporting to.

ECGC Executive Director S Prabhakaran said that there were fewer claims from the non-US markets, which was borne out by the fact the total number of claims have declined to 519 between April and March 12 this year, as against 712 in the corresponding period last year. The overall claims record this year so far is marginally better than last year, with claims from banks dropping.

So far this year, ECGC has paid out Rs 189 crore to banks as against Rs 261 crore in 2007-08. The claims from banks was high last year as there were two large claims that accounted for Rs 90 crore of the total.

The total claims so far this financial year are estimated at Rs 369 crore, as against Rs 380 crore during 2007-08.

While exporters are complaining that ECGC is denying claims or charging a higher premium due to the heightened risk of defaults, ECGC denied it. “We are not declining covers. The demand from textile, gems and jewellery and engineering segment has increased over the last few months,” said Prabhakaran. He, however, said that the insurer is not considering the possibility of increasing the premium rates but that an increase will only take place if claim settlement becomes unbearable.