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Export insurance to boom this year - insurer
( 2003-05-06 10:22 ) (1 )

A growing share of China's exports is likely to be insured in future, a major industry player has predicted.

Export credit insurance, which differs from commercial insurance,protects exporters from losses due to importers' defaults or delayed payments.

China Export Credit Insurance Corporation (Sinosure) is China's only wholly State-owned policy insurer in charge of the service.

Established in 2001, Sinosure's major task is to provide insurance services to exporters of goods, technology and services in accordance with State policies.

According to Tang Ruoxin, general manager of Sinosure, export credit insurance is young in China and development of the industry is slow. So far, only about one per cent of the country's total exports is covered by such insurance, compared with the world average of 12 per cent.

To expand the insurance business, the corporation has developed a three-year plan. According to the plan, the expansion of export credit insurance is expected to far exceed the growth rates for gross domestic product (GDP) and total exports in the next three years.

The goal for this year is to double the value of insured goods recorded last year.

Tang said Sinosure's business is already growing this year. The value of exports with insurance protection increased 150 per cent in the first three months of this year compared with the same period in 2002. Most of the insurance buyers are enterprises in coastal areas where the economy is comparatively advanced.

The growth was driven by increasing awareness of the benefits of insurance, stronger support by government, and improved services provided by Sinosure, Tang said.

Tang disclosed that the corporation will launch five new short-term insurance products to meet the demands of export enterprises.

While the company is developing business in coastal and other economically developed areas in China, it has not neglected the country's western regions or its service to small and medium-sized enterprises, Tang said.

The western regions have not grown as much as coastal areas of China and its foreign trade volume is small, resulting in very low rates of export insurance.

The company has decided to provide flexible services to local exporters and lower insurance premiums to help enterprises in western China reduce the risk of losses in foreign trade.

The decision reflects State policy on the development of western regions and international practice. Many foreign countries also give preferential treatment to economically-backward areas, Tang said.

Small and medium-sized enterprises, with annual exports of less than US$15 million, have been major customers of Sinosure.

To encourage them to export more, the company has lifted the minimum threshold for export value. For instance, the short-term insurance is only available for exports valued at over US$1 million. It is not only the threshold in China but also common elsewhere in the world.

However, when dealing with applications by small and medium-sized exporters, the corporation often lowers the required value of exports for credit insurance by half or even bigger margins.