ENG-1990 — Page 128

INDUSTRY AND TRADE

A softening of demand and concern about defaults in the United States, the ECIC's major insured market, coupled with uncertainty arising from events in the Middle East and Eastern Europe encouraged more Hong Kong exporters to seek the assistance and advice of the ECIC.

During 1990, the ECIC registered total insured business of $13,359 million and premium income of $79 million, an increase of 16 per cent and 16 per cent respectively over 1989. Against these, it paid out $32 million in claims, an increase of 19 per cent. ECIC's major insured markets are the OECD countries which account for about 90 per cent of the total insured trade.

To meet the expanding needs of the exporting community, the corporation continued to improve its services and to intensify its marketing efforts. During the year, the ECIC upgraded its computer system and streamlined procedures to enhance efficiency and productivity.

The corporation's paid-up capital of $20 million is provided by the government, which guarantees the payment of all moneys due by the corporation. The maximum contingent liability arising from its insurance and guarantees operations which may be assumed by the corporation is $6,000 million. It is autonomous in its day-to-day operations and is run on a commercial basis. It is assisted by a 12-member Advisory Board comprising prominent members of the private business sector and representatives from the government.

The ECIC's activities fall into three main categories. The most tangible is the protection provided by the corporation to indemnify policyholders up to 90 per cent of their losses. The cover is available for domestic exports and re-exports transacted on all kinds of short-term credits and payment methods including documents against payment, documents against acceptance and open account up to a maximum credit period of 180 days. Shipments from third countries direct to overseas buyers are covered. Cover is also available to protect exporters against buyers' insolvency during manufacturing, against non-payment due to war and civil disturbance, or against confiscation and non- repatriation of raw materials, work-in-progress and finished products where goods are manufactured outside Hong Kong. For exports of capital goods and services sold on medium or long-term credits, the corporation can provide tailor-made insurance policies.

The second main function is to provide credit advisory services for its policyholders. The corporation's computerised databank contains the names of more than 60 000 overseas buyers. A policyholder may apply to the corporation for the issue of a revolving credit limit in respect of an overseas buyer. Before issuing the limit, it will have investigated the prospective buyer's creditworthiness, the market trading environment and the terms of payment of the proposed trade. The credit limit thus represents the extent of credit the ECIC considers prudent for the policyholder to offer the overseas buyer.

Third, when a policyholder experiences payment problems, the ECIC provides a risk management service. A policyholder is advised on possible courses of action either to prevent or minimise any loss. During 1990, the ECIC noted with satisfaction the workings of the arbitration system for settling claims in China, but was concerned that more United States corporations were seeking protection from creditors under Chapter 11 of the US Bankruptcy Code.

In February 1990, the corporation hosted the general meeting of the International Union of Credit and Investment Insurers (the Berne Union). The meeting was attended by 90 delegates of 36 member organisations from 30 countries. In its day-to-day activities, the ECIC exchanges views on overseas buyers and markets with these organisations.

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