Recourse Insurance

About the product

In contracts with foreign customers, it is generally the case that Norwegian exporters have to provide various types of bank guarantees, such as advance payment bonds, performance bonds or warranties.

During times of instability, there is an increased risk that exporters will not be able to deliver as agreed to foreign customers due to sanctions, expropriation, civil unrest, currency restrictions, etc., (political risk). This may result in the buyer drawing on bank guarantees, which means that the exporter must compensate the bank that provided the guarantees. Eksfin can assure the exporter against such payments to the bank and provide payment protection if the buyer unwarrantably withdraws the contract guarantees

Conditions and structure:

• The guarantee covers losses that result from non-delivery due to sanctions, boycotts, law amendments and so forth, and buyer can, in accordance with the contract, draw on the contract guarantees.
• The guarantee will not apply to non-deliveries if the exporter or someone acting on their behalf breaches the export contract, unless due to political risk.
• The guarantee will apply if the buyer draws on guarantees without having the right to do so. This is a risk because contract guarantees are often issued without conditions (on demand).
• If payments are made under the guarantee, Eksfin will take over the exporter’s recourse/damages claim against the buyer or other parties.
• The bank that issues the contract guarantees can take security in the guarantee from Eksfin, which must be accepted by Eksfin.
• Sustainability, environmental, anti-corruption and KYC requirements must be satisfied in accordance with relevant regulations.

How much does the guarantee cost?

• Eksfin charges a premium when issuing guarantees. The premium is set based on the maturity date and is affected by the political situation in the buyer’s country.
• Eksfin assesses the risk level of political unrest occurring in the buyer’s country or potential introduction of sanctions that will impact delivery under the contract.

How to apply?

The exporter applies for guarantees from Eksfin and must apply before bank the guarantees are issued.