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Premium

In: Export Credit Insurance and Guarantees

Author

Listed:
  • Zlatko Salcic

Abstract

In the ECA context, the premium is a fee charged by ECAs for providing the ECA cover for the risk of non-payment of a credit by a foreign buyer and for other risks covered by ECAs. The term ‘premium’ comes from the insurance business, which has many similarities with the ECA cover. However, the premium charged by ECAs does not have the same purpose as premiums charged by insurance companies. The purpose of the ECA premium is to create financial reserves for potential losses and cover the operating costs of ECAs. Unlike insurance companies, ECAs are not expected to make profit. Another difference is that insurance companies may become insolvent and bankrupt if their financial reserves are insufficient for paying all claims resulting from the insured risks. ECAs cannot become insolvent when their financial reserves are insufficient for paying all claims because they will receive additional funds from the state.

Suggested Citation

  • Zlatko Salcic, 2014. "Premium," Palgrave Macmillan Books, in: Export Credit Insurance and Guarantees, chapter 13, pages 123-131, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-36681-8_13
    DOI: 10.1057/9781137366818_13
    as

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