No abstract

This article aims to analyse the issue of a lack of rules on the insurance cover of interest from an OECD perspective during the period 2010-2020. Export credit agencies (ECAs) support export and apply minimum premium rates (MPRs) to the principal amount only, while the insurance agreement covers also the interest amount. This area can be described as a grey zone, because ECAs can decide themselves what cover they provide for a limited price. This paper explains which parts of a lending rate should be covered under credit insurance and provides theoretical and empirical analysis of the maximum extent of interest cover. The extent of such cover is closely related to the return on ECAs' investments. An excessive amount of interest cover creates room for market failures such as moral hazard or adverse selection, which have a negative impact on the domestic economy. The right amount of interest cover, on the other hand, guarantees long-term sustainability and a level playing field among ECAs, as the OECD requires.

This analysis tries to address the problem of the insufficiency of premium rates used by export credit agencies. This paper aims to answer why and how states should run agencies that may create losses. We see that each supported exporter brings some other benefits to the public budget, and we try to propose how it could be measured. This paper therefore focuses on benefits and costs of the domestic economy. This analysis aims to develop a model that calculates the impacts of each supported export project. The results must be comparable between projects so that projects can be ranked and decisions made on which ones should receive support under current capacity restraints. The current state of knowledge has been analysed, and little attention has been paid to this microeconomic area of export support. The model structure also helps us understand why governments tend to maintain export credit agencies even though they may be temporarily loss-making.