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Risks covered
The standard ARI policy protects the Exporter against:
- Buyer insolvency;
- Buyer payment default;
- Buyer repudiation (where buyer refuses to accept the goods);
- Contract cancellation (if contract coverage is in place);
- Currency transfer risk (buyer's inability to transfer hard currency out of the country);
- Cancellation of export or import permits; and
- War, revolution or insurrection.
The ARI policy can be customized to meet the Exporter's specific coverage requirements. Commercial trade disputes between the Exporter and the buyer are not covered under the ARI policy until the dispute is finally settled, by negotiation or otherwise and the loss amount is clearly established.
The basics
For coverage to be in effect, the Exporter must:
- Ensure that each contract of sale is eligible for coverage;
- Confirm the creditworthiness of the buyer at the time of shipment or date of sale by obtaining buyer credit approval from EDC or, for smaller sales, following the required credit management procedures in the Policy;
- Declare the eligible sales and pay premium on them; and
- Take the necessary steps to prevent and minimize loss.
Declaring exports
There is no requirement to pay a minimum premium amount under the standard ARI policy. The standard ARI policy requires that by the 20th day of each month the Exporter must declare and pay premium to EDC on covered shipments/contracts that have occurred during the previous month.
The claim payment process
Claims must be filed with EDC within 12 months of the loss date (i.e. invoice due date). Once a claim has been filed, it typically becomes eligible for payment either 4 or 6 months after the loss date, depending on the type of policy in effect. However, if the buyer has filed for bankruptcy, the claim becomes immediately eligible for payment. To initiate the claim payment process the Exporter is required to complete and submit a one page Claim Application form along with supporting documentation evidencing the transactions, such as:
- Credit information, in accordance with the policy
- Sales invoice
- Statement of account
- Proof of debt
- Proof of shipment or export
- Proof of insolvency (if relevant)
- Other supporting documentation or other documents evidencing the transactions
- Documents outlining what actions the exporter has taken to collect
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