Export Credit Insurance — Why Government?

Abstract

The present paper conducts a positive analysis on several important aspects of export credit insurance. The study shows that export credit insurance is a useful device to protect domestic exporting firms against various political risks and default risk in the foreign market. However, the author points out that the government can utilize export credit insurance aggressively to promote exports by intentionally setting a more-than-favorable premium rate. Under such a rating policy the government is subsidizing exporting firms through export credit insurance.