Exporters are often confronted with the need for first-class bank guarantees issued in favour of their foreign buyers as a condition for entering into export contracts or insuring performance of their contractual obligations. Consequently, they are exposed to the risk of a guarantee being called irrespective of the performance of their contractual obligations. In addition, they are exposed to various political risks that may prevent them from performing a contract and lead to the collection of payments under a guarantee.
The Programme for the Insurance of Bank Guarantees Issued for the Purpose of Winning or Performing Export Contracts enables banks to insure the risk of payment under a guarantee owing to an unfair calling by a guarantee beneficiary despite due fulfilment of obligations on the part of an exporter, owing to a political risk preventing due fulfilment of obligations on the part of an exporter or owing to a fair calling due to exporter’s non-fulfilment of export contract or tender obligations being the exclusive responsibility of the exporter.
- Exporter enters into export contract with buyer
- Bank issues guarantee in favour of buyer on instructions made by exporter
- Bank and exporter enter into insurance contract with HBOR
- Buyer collects payment under guarantee
- HBOR pays indemnity to bank after 60 days of the waiting period
- HBOR is entitled to recourse against exporter in case of risk of fair calling
- HBOR is entitled to recourse against buyer or third parties in case of risk of unfair calling.