The New India Assurance Company has sold its first business credit shield risk cover to an Indian pharmaceutical company. The provisional insurance premium on the plan stands at Rs 1.5 crore against the company's export receivables to various countries.
New India introduced the business credit shield product in September last year. The company is also eyeing export finance businesses of banks, and have sought support from the Reserve Bank of India to be treated by public sector banks on par with the established state credit insurance agency -- Export Credit Guarantee Corporation of India Ltd (ECGC).
According to internal banking circulars, banks are allowed to insure export receivables with ECGC. "Bank are asking for necessary amendments to be made in internal circulars," said officials.
New India is targeting export finance businesses of banks since they have an in-house credit appraisal system in place. "This will help create synergy between banks' domestic credit appraisal system and that of our strategic partner -- the German-based Gerling Credit Insurance Group," said New India officials.
Gerling is one of the three largest credit insurance outfits in the world, with 95 offices in 32 countries. New India intends to capitalise on the global insurance company's exclusive database of buyers, which gives the background of traders and their credit worthiness. Moreover, New India has its own set of corporate clients.
The company will first vet the credit worthiness of buyers before committing itself to insuring risks.
"Only if we find the credit worthiness to be safe, we will offer insurance cover on credit receivables," said New India officials.
Some banks have shown interest in New India's business credit shield risk cover, as it will enable them to get insurance cover on discounting the receivables of buyers abroad.
"The premium will be paid by the seller. But the risk on receivables will be borne by the insurance company," said New India officials.
The state-owned company will pay claims if a bank is not able to recover dues from buyers and will also help in recovering dues, they added.
