Export Credit Guarantee operations
Export Credit Guarantees
Finnvera seeks to safeguard the competitiveness of Finnish enterprises in export markets by offering them export and project financing at rates comparable to those offered by our main commercial rivals to their export companies. Our clientele comprises both companies and domestic and international banks and financial institutions.
Risks to be covered
For granting export credit guarantees, countries are classified into eight categories. The classification is based on methods used by export credit agencies and on country risk assessment. Various factors affect the determination of the country category: assessment of the country's ability to manage its external liabilities; expectations of the future trend of the country's economy; and political stability and the legislative framework.
Since there may be considerable differences between individual countries, even within the same category, risk-taking is based on Finnvera’s country-specific guarantee policy.
We monitor the economic and political situations of countries and make adjustments to country categories depending on the changes that have occurred. The category of each country is checked at least once a year.
Political risks to be covered
Political risks are related either to the country of a foreign buyer or borrower, or to a third country which can cause the exporter, investor or financier to incur a credit loss.
Political risks include restrictions on transfer of the credit currency, rescheduling of debts, expropriation, and war or insurrection. Sovereign risk is caused by an entity that represents the full faith and credit of State. In most cases this is the Ministry of Finance or the Central Bank.
When Finnvera covers only the political risks involved, the commercial risks associated with the buyer, the borrower or the guarantor are not covered.
Political risks are assessed by continuously following the creditworthiness of the countries with political risk (Country policy). The term political risk refers to all factors or events which influence the country's economy, internal stability and international relations.
Political risk may materialise as the consequence of a long course of events, or may result from internal or external economic and political shocks. Political risks are assessed according to the following criteria:
Commercial risks to be covered
Commercial risks arise from foreign banks, companies or project companies. Typical commercial risks include the buyer's, borrower's or guarantor's insolvency or unwillingness to pay its debt.
Factors considered assessing of the commercial risks of the transaction include:
- export transaction/project
- line of business
- environmental aspects
- buyer's country
- other aspects involved, if any
Further information about commercial risks
- Corporate/buyer risk
- Project risk
- Bank risk
The country policy described is indicative only. Finnvera reserves the right to set additional conditions regarding any particular country, buyer, or bank as well as change the percentage of cover for a transaction. Finnvera assumes no liability to issue a guarantee to any specific transaction. We recommend that you contact our country policy and export credit guarantee advisers prior to making an offer for financing a transaction with intended guarantee support from Finnvera.
Finnvera's country policy determines
- Finnvera's risk-taking in the country
- securities and payment condition requirements
- the acceptable maximum risk period
Finnvera classifies countries into seven categories. A country's category for short-term and medium/long-term guarantees may be different.
A number of international rules and agreements regulate export credit guarantee activities. The purpose of the rules is to make sure that countries do not compete by means of officially supported export credit terms. Close international co-operation is of vital importance to Finnvera in order to adhere to and to develop the regulatory framework.
International export credit co-operation between nations is carried out in the OECD and the EU. The OECD Arrangement on Officially Supported Export Credits is the most important international agreement regulating export credit operations. The EU rules strive to create a level playing field for all exporters in the EU countries.
The Berne Union is the international professional association of export credit agencies, which provides a forum for extensive exchange of information and promotes sound principles of export credit and investment guarantee activities.
The OECD groups 30 member countries sharing a commitment to democratic government and the market economy.
With active relationships with some 70 other countries, NGOs and civil society, it has a global reach. Best known for its publications and its statistics, its work covers economic and social issues from macroeconomics, to trade, education, development and science and innovation.
The European Union Directive aimed at harmonising medium/long-term guarantee activities came into force in June 1998. The Directive strives to provide equal guarantee terms throughout the EU and thus equal competition possibilities for export products, where the related finance terms do not constitute a competitive edge. The Directive encompasses rules for guarantee conditions, guarantee premiums, country policy and notification procedures. As to guarantee premiums and country policy, the Directive observes the OECD's Premium Agreement.
An updated EU communication based on the EU competition rules concerning short-term (risk period less than 2 years) export credit guarantee activities came into force in the beginning of year 2013. Previous version of the communication has been effective since 1997. The communication denies official export credit agencies from cover marketable risks, which are risks that private insurance companies are willing to cover. According to the Communication, Finnvera cannot grant guarantees with a risk period less than 2 years (manufacturing period + repayment period) to the following markets:
- Austria, Bulgaria, Belgium, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Ireland, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom, Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland, USA
Exceptions to EU communication's principles:
As a part of the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, the EU Commission has announced the above countries as temporarily non- marketable until the end of 2021. Consequently, the official export credit agencies of the EU countries are able to temporarily provide ST credit insurance as one way to address the impacts of the corona virus crisis.
In the case of these so-called “marketable risk countries”, the EU rules on transactions with a risk period of under two years only apply to conventional credit insurance for covering buyer risks, not guarantees for bank risks. If the payment method is a letter of credit and the guarantee used is a Letter of Credit Guarantee or some other guarantee where the risk applies to a bank, Finnvera may, under the risk-sharing principle, consider granting a guarantee for said countries.
Finnvera is a member of the Berne Union (International Union of Credit and Investment Insurers). Berne Union is the international association for export credit and investment insurance worldwide, with over 50 members from over 40 countries.
BU aims at developing export credit and investment insurance activities mainly based on extensive professional exchange of information among its members.
The BU members have committed to guiding principles reflecting their way to conduct their business and pursue the purpose of the BU. More information about the Berne Union and the Guiding principles can be found from the association’s website.
Finnvera has concluded co-operation agreements with various guarantee agencies. These agreements form the basis for co-operation in individual projects, but they are not a necessary condition for co-operation - Finnvera may be involved in mutual projects although such a bilateral agreement does not exist.
The simplest method for involvement in projects including exports from many countries is to include the foreign deliveries in the guarantee issued by Finnvera.
Joint guarantee and reinsurance arrangements
Joint guarantee and reinsurance arrangements are practical in large-scale projects or projects involving risky markets.
In a joint guarantee, each agency covers its own national share according to their guarantee terms, and co-operation takes place mainly in the form of exchanging information.
In a reinsurance arrangement, the principal insurer is the guarantee agency in the country from where the largest share of exported share is supplied. The main insurer creates a guarantee contract for the project as a whole, and then draws up a reinsurance contract with the guarantee agency in the subcontractor's country. The subcontractor's guarantee agency usually accepts the guarantee terms of the main insurer to a large extent.
Finnvera has co-operation or reinsurance agreements with the following organisations:
- Austria - OeKB
- Belgium - ONDD
- China - China EximBank
- China - SINOSURE
- Czech Republic - EGAP
- Denmark - EKF
- Estonia - KredEx
- France - COFACE
- Germany - EULER HERMES
- Great Britain - ECGD
- Iran - EGFI
- Iran - OIETAI
- Italy- SACE
- Japan - NEXI
- Luxemburg - ODL , Northstar
- Meksiko - BANCOMEXT
- Multilateral - CABEI
- Multilateral - EBRD
- Multilateral - IIC
- Multilateral - MIGA
- Netherlands - ATRADIUS
- Norway - GIEK
- Russia - Vneshekonombank / Eximbank of Russia
- Singapore - ECICS
- South-Korea - KEIC
- Sweden - EKN
- Switzerland - SERV
- USA - EX-IM BANK
- USA - OPIC
- USA - Steadfast Insurance Company
Scope of application
In line with the OECD Recommendation, this policy applies to all export financing products provided by Finnvera where the accompanying credit has a repayment term of two years or more.
This policy excludes Environmental Guarantees handled by the Large Corporates unit, Finnvera Guarantees, Finance Guarantees and Bond Guarantees, as well as guarantees pertaining to military equipment or agricultural commodities.
Guarantees pertaining to shipyards and shipping companies that operate in accordance with the requirements of EU legislation or similar legislation are assessed in Finnvera whenever necessary. However, the assessments and reviews conducted and, for instance, any environmental permits granted must be submitted to Finnvera, if necessary.
Raw Material Guarantees are included in the scope of the policy. Raw Material Guarantees are granted by virtue of the Act on State Guarantees for Ensuring the Supply of Basic Raw Materials. For Raw Material Guarantees, environmental and social issues are determined separately for each project.
In a reinsurance situation where Finnvera agrees on reinsurance with the original insurer, Finnvera’s project review can be conducted on the basis of the assessment made by another export credit agency, a major multilateral financial institution participating in the financing, or the original insurer. The precondition is that the assessment is comprehensive enough.
In general, Finnvera’s project review encompasses the whole project even when export financing is granted only for a part of the project or for an individual delivery of equipment that is associated with a project.
Project-specific information searches are conducted to determine any environmental and social risks associated with Credit Risk Guarantees that are applied for to cover pre-delivery risks. Whenever necessary, applicants for export financing are asked to provide additional information.
The concessional credits granted by the Ministry for Foreign Affairs are always accompanied by Finnvera’s export credit guarantees. However, the Ministry’s Department for Development Policy is responsible for the review of the environmental and social impacts of these projects and for the related costs. The Ministry for Foreign Affairs determines the object and scope of the review required.
Process for reviewing environmental and social impacts
Screening, classification and review of projects
The purpose of screening is to identify the applications falling within the scope of Finnvera’s project review. The application is reviewed if it pertains to a project. The level of potentially negative and positive environmental and social impacts is identified during the screening and classification of projects. This information is then used to determine the appropriate scope of review and the project category.
Projects in category A
According to the OECD’s Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence Finnvera shall publish environmental and social impact information on category A projects, which possibly may have significant adverse environmental and/or social impacts. The information shall be published when the guarantee still is an offer, at least 30 calendar days before Finnvera signs the financing agreement. After the agreement has entered into force the information is transferred with the relevant parties’ consent to the Guaranteed Transactions -page.
Offers regarding projects in category A to report:
Name of project: Araguaia Nickel Project
Description of project: Greenfield open pit nickel laterite mining and processing project
Location and country of project: Approximately 40 km northwest of the town of Conceição do Araguaia in the Pará State, northeast Brazil, and approximately 25 km west of the Araguaia River
Environmental and social classification: A
Information published: 3 June 2021
Source of environmental and/or social impact information: Araguaia Project Environmental and Social Impact Assessments
Name of project: Eti Bakir Adiyaman Copper Mine project
Description of project: Deliveries to the copper flotation plant
Location and country of project: Adiyaman, Turkey
Environmental and social classification: A
Information published: 28 March 2018
Source of environmental and/or social impact information: Environmental Impact Assessment Report (PDF, 230 Mb)
Buyer's country: Australia
Exported goods/Project: Container handling equipment
Project classification: A
Information published: 19 August 2015
Environmental and/or social impact information on Project in category A: