Category: Trade credit & political risk · Reviewed by Simon Temme, Account Executive · Last reviewed 2026-06-05
Export credit insurance is the sub-class of trade credit insurance covering UK exporters against the risk of non-payment by foreign commercial buyers, typically including political risk extensions for risks such as confiscation, expropriation and nationalisation, currency inconvertibility and contract frustration, and available from both private market insurers and the UK official export credit agency, UK Export Finance.
Category: Trade credit and political risk Also known as: export credit cover, international trade credit insurance First codified: UK ECGD established 1919 (now UK Export Finance); private market from c.1950s Related legislation: Export and Investment Guarantees Act 1991 [1]; Insurance Act 2015 [2]; Export Control Act 2002 [3]
Export credit insurance covers a UK exporter against non-payment by its foreign commercial buyers. The cover responds to two principal categories of peril:
Commercial risks — buyer insolvency and protracted default, structurally the same as the perils covered under domestic credit insurance but applied to foreign buyers. The cover responds to insolvency events under the buyer’s local insolvency regime and to protracted default under the contractual terms of trade [4][5].
Political risks — events outside the buyer’s control caused by host government action or by political instability. The cover responds to confiscation, expropriation and nationalisation of the buyer or its assets; currency inconvertibility preventing transfer of payment from the buyer’s country; contract frustration by host government action (export bans, import bans, sanctions); war and civil unrest preventing buyer payment; and (in some wordings) sovereign default and rescheduling of sovereign debt [4][5].
The product is available from two main sources. The private market — dominated by Allianz Trade, Coface and Atradius, with significant participation from Lloyd’s syndicates — writes most short-term export credit risk (typically credit periods up to 12 months) and increasingly competes for medium-term business (1–5 years). UK Export Finance (UKEF), the UK government’s export credit agency, provides cover for longer-term transactions, for politically sensitive markets and for transactions where the private market lacks capacity [4][6].
The Export and Investment Guarantees Act 1991 provides the statutory framework for UKEF (formerly known as the Export Credits Guarantee Department, ECGD). The Act empowers the Secretary of State to provide insurance, guarantees and loans in support of UK exports and outward investments, and sets out the operational framework within which UKEF operates [1][6].
The OECD Arrangement on Officially Supported Export Credits sets disciplines applicable to UKEF and other OECD export credit agencies. The Arrangement covers minimum premium rates calculated by reference to country risk classifications and transaction structures, maximum repayment terms, minimum down payments and other terms. The disciplines do not apply to private market export credit insurers, which can offer terms below the OECD minima [7].
The Insurance Act 2015 governs the duty of fair presentation and warranty rules for commercial export credit insurance contracts. The duty applies in the same way as for domestic credit insurance, with disclosure required of all material circumstances known or which ought to be known by the insured [2].
UK export control law under the Export Control Act 2002 and supporting orders restricts the export of controlled goods (dual-use items, military goods, items subject to sanctions). Export credit cover does not respond where the underlying export breaches export control law. Compliance with UK and international sanctions (including those administered by OFSI in HM Treasury) is a routine condition of cover [3][8].
International convention frameworks affecting export credit include the UN Convention on Contracts for the International Sale of Goods (CISG, in force in many UK trading partner states but the UK is not party), the various ICC Incoterms versions (Incoterms 2020 being current) and the ICC Uniform Customs and Practice for Documentary Credits (UCP 600). These do not directly govern the export credit insurance contract but affect the underlying export contract that the insurance covers [9].
A UK exporter places export credit insurance through a specialist credit broker. The broker collects disclosure of the exporter’s customer base by country, with particular attention to higher-risk markets. The insurer’s underwriting team assesses each named buyer using its proprietary database (with continental European insurers having particularly deep international credit information from decades of cross-border credit experience) and assesses country political risk using its country risk methodology [4][5].
Credit limits and country exposure caps are set for each buyer and each market. The country exposure caps are particularly important in export credit: a single market deterioration (a country undergoing political instability, a sovereign debt crisis, a sanctions regime change) can affect all buyers in that market and the country cap protects the insurer from concentration risk. Coverage availability for higher-risk markets (Russia and Belarus after February 2022; Iran, North Korea under existing sanctions; certain Latin American and African markets with ongoing political instability) is restricted or unavailable [4][5].
Premium for export credit insurance is typically calculated by reference to insured turnover with country-specific rate loadings reflecting political risk. Rates for trade with OECD developed markets are typically similar to domestic credit insurance rates; rates for trade with higher-risk emerging markets can be several multiples higher [4][5].
In the event of a non-payment loss, the insured notifies the insurer in accordance with the policy procedures. Claims investigations can be complex for export losses, particularly where political risk perils are involved (requiring assessment of the host government’s actions, the application of any sanctions and the buyer’s underlying creditworthiness). The insurer pays the insured percentage and pursues subrogated recovery through whatever channels are available in the buyer’s home market [4][5].
Short-term export credit (up to 12 months credit period): the dominant private market product, written primarily for routine exports of consumer goods, capital equipment and industrial materials.
Medium-term export credit (1–5 years): for capital goods exports requiring extended credit terms, typically requiring more bespoke underwriting and often involving co-financing arrangements with banks.
Long-term and project export credit (5+ years): predominantly written by UKEF and other state ECAs, supporting major capital projects, infrastructure exports and aircraft sales. Subject to OECD Arrangement disciplines.
Single risk political risk cover: standalone political risk insurance not tied to a specific commercial credit transaction, used principally for investment protection rather than trade credit per se. Addressed in political risk insurance entry.
Pre-shipment cover: cover for the period between contract signature and shipment, addressing the risk of contract cancellation or contract frustration before delivery. Often combined with post-shipment cover into a unified pre-and-post-shipment policy.
UKEF-supported cover: official UK export credit insurance and guarantees for transactions that cannot be supported by the private market. Increasingly used for transactions in higher-risk markets and for major capital goods.
Berne Union cover: international export credit market through the Berne Union (International Union of Credit and Investment Insurers), bringing together public and private export credit insurers worldwide.
A UK manufacturer of telecommunications equipment exports approximately £24m per annum to commercial buyers in Europe, Asia, Africa and Latin America. The company places whole turnover export credit insurance with a major continental European insurer covering both commercial and political risks. The policy includes country exposure caps for each market with substantial differences in country availability (UK and EU markets routinely available; emerging markets subject to more restrictive caps; certain markets unavailable due to current geopolitical conditions). Aggregate annual premium is approximately £140,000 (0.6% of insured turnover, higher than domestic credit insurance reflecting the political risk content). During the policy year, a buyer in an emerging market defaults on a £350,000 invoice due to currency inconvertibility following a host government foreign exchange control intervention. The policy responds for 90% of the loss under the currency inconvertibility section, subject to the waiting period for confirmation that the inconvertibility is sustained rather than temporary. Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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