The Ministry of Finance believes that expanding export insurance guarantees for medium and long-term transactions will help exporters cope with the shekel's appreciation against the dollar. Accountant General Michal Abadi-Boiangiu today signed the expansion of guarantees for Ahsra - The Israel Foreign Trade Risks Insurance Corporation Ltd and Israeli Credit Insurance Company (ICIC) as approved by the Knesset Finance Committee. The guarantee for Ashra, a government company, was expanded by $550 million, and the guarantee for ICIC, an affiliate of Euler Hermes, was expanded by $300 million.
Until now, private insurers only provided insurance for short-term transactions of up to one year. Under today's directive, the government and private insurers will share the latent risk in export transactions, with the private insurers bearing a quarter of the risk. A top Ministry of Finance official said that the expansion will allow more small and mid-sized exporters to operate in new markets.
Minister of Finance Yair Lapid said that the agreement with Ashra and ICIC was one of a series of initiatives by the ministry to help exporters. He said that the step would insure more export transactions, making it easier for exporters to deal with global competition and the strengthening of the shekel against the dollar.
The expanded guarantees increases Ashra's credit framework to $2.7 billion, and ICIC's credit framework to $3 billion. Top Ministry of Finance officials said that, in the past two years, the government has doubled its export guarantees, and that the current expansion should soon include Clal Credit Insurance Ltd.
The guarantees give exporters a hedge against non-payment by foreign customers, and are usually a necessary condition in contracts. The conditions are usually required by the banks when granting easy credit to exporters. The Ministry of Finance said that the expanded guarantees for Ashra are part of a multiyear plan to expand government guarantees for export insurance, in line with the recommendations of a 2013 committee to expand the guarantees to the OECD average.
Published by Globes [online], Israel business news - www.globes-online.com - on June 1, 2014
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