With the global financial crisis hurting more companies in developed countries, Indian insurance firms have hiked premium rates by 25-30 per cent for export credit insurance covers and have imposed a host of restrictions such as maximum liability and credit limit in case of single buyers.
Fearing huge losses, insurance firms have also stopped covering pre-shipment risks as a slowdown in developed markets may lead to cancellation of orders placed with Indian exporters, insurance company sources told
Business Standard.
While the demand for trade credit insurance has gone up after payment defaults rose sharply due to the financial turmoil, insurance companies are turning away many new clients due to the prevailing market conditions, they added.
Credit insurance is purchased by business entities to insure their accounts receivable from loss due to the insolvency of the debtors. Policyholders require a credit limit on each of their buyers for the sales to that buyer to be insured.
A week ago, state-owned Export Credit Guarantee Corporation (ECGC) imposed a credit limit of Rs 50
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