Reinsurance of Short-Term Export Receivables

Acting as an insurer for and on behalf of the Republic of Croatia, HBOR offers, under existing export credit insurance programmes, also Quota Reinsurance Programme providing cover for short-term export receivables against non-marketable and temporarily non-marketable commercial and political risks as a measure of export promotion. The Quota Reinsurance Programme providing cover for short-term export receivables is intended for insurance companies performing export-credit insurance activities in the market of the Republic of Croatia. Quota reinsurance is a type of proportional reinsurance where a quota expressed as a percentage of every risk in the insurer’s portfolio is transferred to HBOR for reinsurance. Under the Quota Reinsurance Programme, variable quota reinsurance can also be contracted by agreeing various reinsurance quotas for various levels of reinsured amounts by foreign buyers. Applicants are not automatically entitled to obtain reinsurance. HBOR makes a decision on each individual application for reinsurance.

GOAL OF QUOTA REINSURANCE PROGRAMME

By the sharing of risk between HBOR and insurance companies that offer insurance of short-term export receivable in the market of the Republic of Croatia, exporters will be able to contract insurance for all foreign buyers (irrespective of the state) at a single place. Export promotion, maintenance of existing and creation of new jobs in the Republic of Croatia as well as strengthening of competitiveness of the national economy.

BENEFICIARIES OF REINSURANCE

Insurance companies providing cover to companies headquartered in the Republic of Croatia for short-term export receivables with up to 180-day credit terms or receivables maturing in up to 2 years including production and payment collection periods.

SUBJECT MATTER OF REINSURANCE

Exporter’s money receivables insured by an insurance company that have arisen from executed and billed deliveries of goods and/or services towards a foreign buyer.

REINSURED RISKS

Commercial risks:

1. Non-payment, late payment, i.e. non-fulfilment of a payment obligation on the part of foreign buyer upon the expiry of the maximum payment period,
2. Insolvency as defined by the governing law of foreign buyer’s country or other objective facts indicating inability to fulfil a payment obligation, initiation of pre-bankruptcy, bankruptcy or liquidation proceedings against foreign buyer.

Political risks:

1. War or warlike events,
2. Rebellion and revolution,
3. Government measures limiting or impeding transfers or free payments owed to exporter for a period longer than 3 months. The same effects will be produced by the deferral of payment for more than 3 months if bankruptcy or liquidation proceedings cannot be initiated against foreign buyer on the basis of a court decision (foreign buyer is a public law entity).

SCOPE OF REINSURANCE COVER

As a reinsurer, HBOR agrees with an insurance company to include the risk into reinsurance. In accordance with the agreed quota, HBOR as a reinsurer participates in:

1. Insurance premium,
2. Indemnities and additional costs,
3. Amounts collected through recourse.

Reinsurance covers receivables arisen in the period of reinsurance contract lifetime and their cover remains in effect until their expiry, i.e. until the expiry of the payment period for the insured receivables.

LEVEL OF REINSURANCE COVER

The extent of cover of HBOR as reinsurer can reach up to 90%, whereas the extent of cover of insurance company reaches at least 10%.

CONTRACTING REINSURANCE WITH HBOR

For the purposes of reinsurance contracting, it is necessary to submit to HBOR an application for the execution of a reinsurance contract with the corresponding enclosures defined in the application. HBOR reserves the right to request other documentation necessary for processing the application for the execution of a reinsurance contract. Standardised forms of application for the execution of a reinsurance contract are available at request at HBOR.

REINSURANCE CONTRACT

A reinsurance contract is executed between HBOR and an insurance company. Constituent parts of a reinsurance contract are as follows:

1. General Terms and Conditions of Insurance of Short-Term Export Receivables of Insurance Company accepted by HBOR,
2. Accepted List of Countries for which insurance company wishes to contract reinsurance with HBOR for individual reinsurance year,
3. HBOR’s Classification of Countries by Risk Category in effect.

REINSURED AMOUNT

Amount of money for which reinsurance is approved for individual foreign buyer.

REINSURANCE PREMIUM

Insurance company pays to HBOR as reinsurer a percentage of the calculated insurance premium for non-marketable commercial and political risks reinsured with HBOR in accordance with the established level of reinsurer's coverage. Insurance company pays to HBOR as reinsurer a percentage of the calculated insurance premium increased by 30% for temporarily non-marketable commercial and political risks reinsured with HBOR in accordance with the established level of reinsurer's coverage.

INDEMNITY UNDER REINSURANCE

Amount of money paid by HBOR as reinsurer to insurance company relating to the occurrence of reinsured risks in accordance with the executed reinsurance contract, due to which the insurance company paid an indemnity to the insured under the submitted indemnity claim submitted to the insurer after the expiry of the waiting period of at least 3 months.

REPORTING OBLIGATION

In accordance with the deadlines defined in reinsurance contract, insurance company is obliged to submit to HBOR, as reinsurer, information on exposure, insured turnover, received late payments, received indemnity claims, paid indemnities and recourse payments after the expiry of each individual quarter.

OTHER TERMS AND CONDITIONS TO BE REGULATED BY REINSURANCE CONTRACT

General Reinsurance Limit General reinsurance limit is the cumulative gross amount of all reinsured amounts that HBOR, as reinsurer, is willing to include into reinsurance on the basis of reinsurance contract executed with insurance company. Reinsurance Limit by Country Reinsurance limit by country is the cumulative gross amount of reinsured amounts by country that HBOR, as reinsurer, is willing to include into reinsurance on the basis of reinsurance contract executed with insurance company. Reinsurance Limit by Individual Foreign Buyer Reinsurance limit by individual foreign buyer is the cumulative gross amount of reinsured amounts by individual foreign buyer that HBOR, as reinsurer, is willing to include into reinsurance on the basis of reinsurance contract executed with insurance company. Reinsurance Commission Amount of money paid by HBOR as reinsurer to insurance company to cover part of the costs of obtaining insurance on the basis of executed reinsurance contract. Reinsurance Year A 12-month reinsurance period beginning and ending on the dates specified in reinsurance contract.

Duration of Reinsurance Contract

Contract lasts until the date specified in reinsurance contract on the basis of reinsurance year unless automatically extended for a further period of one year. Contract will be automatically extended for one year unless one contracting party, no later than 60 days before the expiry of reinsurance year, notifies the other contracting party in writing that it will not extend reinsurance contract.