The policies issued by ECGC are meant to protect exporters against failure of the importer or restrictions placed by the importer’s country. The standard policy issued by ECGC covers commercial and political risks. Commercial risks covered are:
(i) insolvency of the buyer;
(ii) buyer’s protracted default to pay, within six months of due date, for ,goods accepted by him, and
(iii) buyer’s failure to accept the goods, when such non-acceptance is not due to the exporter’s action.
Political risks covered are:
(i) restrictions on remittances in the buyer’s country or any government action which may block or delay payment in rupees to the exporter;
(ii) war, revolution, or civil disturbances in the buyer’s country;
(iii) new import licensing restrictions or cancellation of a valid import licence in the buyer’s country.
(iv) cancellation of export licence or imposition of new export licensing restrictions in India;
(v) additional handling, transport or insurance charges due to interruption or diversion of voyage which cannot be recovered from the buyer; and
(vi) any other cause of loss occurring outside India, and normally not in-sured by commercial insurers, and beyond the control of the exporter or the buyer.
Risks not covered
The following risks are not covered by the policy:
(i) disputes in quality;
(ii) causes inherent in the nature of the goods;
(iii) buyer’s failure to obtain import exchange authorisation from the appropriate authority;
(iv) default of an exporter or his agent; and
(v) fluctuations in the exchange rates.
The exporter is expected to include all shipments made by him in a period of twelve months for which the policy is valid by way of declarations to ECGC since the policy is on the whole turnover basis. The premium payable is determined on the basis of the monthly declarations of the exporter. The policy may cover risks from the date of shipment or from the date of contract. In either case, the policy may cover both political and commercial risks (comprehensive policy) or cover only political risks. Thus the policy may be any one of the following:
(i) Shipment (Comprehensive) Policy;
(ii) Shipment (Political Risks) Policy;
(iii) Contract (Comprehensive) policy; or
(iv) Contract (Political Risks) Policy.
The rate of premium differs depending upon the transaction and the country of import. The ECGC pays 90% of the loss on claims admitted by it.