ECGC to hike export insurance premium as claim payments shoot up

Gems & jewellery, garment sector top the chart in claims

With a sharp rise in payout for claims from banks, Export Credit Guarantee Corporation Ltd’s will hike the premium it charges to lenders for insurance cover for credit to exporters. The upward revision will be bank-specific, taking into account claims behaviour.

Export Credit Guarantee Corporation Ltd’s (ECGC) payout for claims rose by 45 per cent at Rs 12.83 billion during the FY 2017-18, as against Rs 8.85 billion in 2016-17.

The claims from banks for defaults in gems & jewellery, cotton covering fibre, yarn and fabrics, Textile and Garments sector had the highest share in payout in Fy18. The level of claims payment is expected to stay elevated in Fy19 due to continuing stress in the banking sector, said Geetha Muralidhar, Chairman-cum-Managing Director of ECGC.

The government-owned insurer has told Indian Bank's Association (IBA) that it will revise premium rates and reduce the extent of cover for export credit for large borrowers. It will reduce export credit cover, for large borrowers for banks, to 50 per cent of the outstanding amount. Earlier, ECGC used to provide over 65 per cent export credit cover.  

At present, ECGC charges premium between six paise to 13 paise per month for Rs 100 of cover, depending on claims behaviour and stress in the sector. Rates would be within the upper-end of band (rs 13 paise).    

She said the gross claims payout during the year exceeded that of gross premium income owing to the settlement of claims to banks. The total claims paid during the year to both banks and exporters amounted to Rs 12.83 billion. In addition, provisions of Rs 60 billion have been set aside for future payouts.

ECGC said the Gross Premium earned in Fy 2017-18 was Rs 12.40 billion as against Rs12.67 billion in the 2016-17. The investment and other income increased to Rs 6.96 billion in FY 2017-18 up from Rs 6.56 billion in the previous Financial year.

Its Profit After Tax (PAT) available for appropriation in the FY 2017-18 dipped sharply at Rs 0.74 billion, against Rs 2.82 billion in FY2016-17.

Appropriate risk mitigation measures were continued in respect of sectors with high claim ratios namely, Gems, Jewellery and Diamond sectors to protect the interest of ECGC as well as that of banks, she added.