Under this insurance policy, all the exports of Iranian exporters to different countries with different buyers, together with one by one of the shipments made to them, are covered against major political and commercial risks during one calendar year.
In other words, if due to the occurrence of any of the covered risks, the Iranian exporter fails to collect its receivables from any of the foreign buyers, the Fund will compensate the exporter for the losses based on the issued insurance policy.
The mechanism is like this:
- All potential buyers in separate target markets of the applicant are introduced to EGFI for credit worthiness assessment.
- One by one of all the buyers are assessed regarding their credibility, credit ratings and credit ceilings are set for them, which are revealed to the policy holder to meet the ceilings and not to exceed them if they want to enjoy the Fund’s potential cover.
- A down payment or a tentative provisional premium which is usually a fixed little price or an average little percentage of all the premium chargeable for the future potential shipments (Maximum ten percent of rough premium) for the upcoming year is charged and the original insurance policy is issued.
- Before any shipments are made the policy holders are required to self-state the amount and value of the shipment and the full contract details to receive an inclusion letter from the Fund (Which extends EGFI’s real full cover) in return for which they are required to pay the final premium.
- After the final premium is paid and the inclusion letter is issued the shipment can be made under the Fund’s cover.
- Such a procedure is implemented for all the shipments for all the buyers in different countries.
- Premium calculation:
The amount of the insurance premium payable is based on the following:
- The destination country risk group
- The repayment period (below six months and above that follow different premium category)
- The credit rating of the buyer (Sovereign, Sub-Sovereign and Private company (form Category A to Category E)
- The Franchise and political or commercial risks involved
- The number of foreign buyers
- The number of export destination countries
Who might apply?
Such an insurance policy and cover (WTO) is available for all Iranian exporters of goods and services who enjoy a commercial Card from Iran’s chamber of commerce or other related chambers of commerce all over the country as a real or legal person who has exports to different countries and several buyers.
The Risks under Whole-turn-over insurance policy is like specific insurance policy:
A) Commercial risks:
- The buyer's refusal to accept the exported goods or services due to the reasons which have nothing to do with the Iranian exporters obligations when actually the exporter has rightly met all sales specifications and fulfilled its contractual obligations but still the foreign buyer does not want the goods and has violated or dishonored the contract articles and does Not want to keep its payment obligations.
- Non-payment or any example of protracted default which leads to the failure by a buyer to pay the contractual due payment within a pre-defined period calculated from the due date or extended due date which leads to non-reception of the price of goods or services on the due date by the seller.
- Buyer's lack of financial ability due to bankruptcy, insolvency, lien or suspension of its activities which in the end leads to the nonpayment of the sales invoices.
B) Political risks:
- The stop of trade relations or the severing of political relations in between Iran and the buyer's country, so that as a result, the exporter does not succeed in receiving its trade receivables from the foreign buyer.
- Enforcement of restrictive economic policies that block exporters' receivables.
- Restrictive enactment of trade policies related to import and any currency restrictions in the buyer's country.
- Expropriation of property from the buyer due to nationalization or confiscation of property in such a way that the buyer is unable to fulfil its payment obligations and as a result the Iranian exporter does not succeed in receiving its receivables.
- Other factors beyond the control and supervision of the Iranian exporter and the foreign buyer, which, as determined by the Fund's Board of Directors, leads to the non-collection of trade receivables by the exporter.