Recently, the German Federal Government made a decision on Export Credit Guarantees also known as “Hermes Cover” for Ukraine — to expand the coverage options offered by Germany.
In this regard, on August 30, the European Business Association together with Global Business for Ukraine held the webinar to find out more about the new opportunities of Hermes Cover program, the process of application, conditions, and limitations.
The German Government has mandated Euler Hermes to manage the Export Credit Guarantees scheme. The following information will be helpful for those interested in purchasing goods from German business partners through export credit insurance.
This tool can be beneficial for German exporters repeatedly supplying goods to their partners in different countries, including Ukraine.
The credit insurance under the whole-turnover Export Credit Guarantees scheme normally grants up to 6 month of credit period for raw material, components, semi-finished, consumer goods, spare parts and up to 12 month high-value components, fertilizer and plant protection products, consumer durables. It’s worth noting that war risk is not excluded from the cover and can be covered along with other risks when it comes to cooperation with Ukrainian companies.
How to apply? For the granting of guarantee a German company should contact Euler Hermes when negotiations are ongoing but before signing of the contract. Euler Hermes prepares an application in order assess whether an importer of goods can meet contractual obligations, i.e. the credit worthiness of the importer. The assessment of specific war risks with this importer is a standard part of the process. For this, Euler Hermes experts will collect information from independent credit agencies and banks. The credit check can also be supported with business figures such as balance sheet, assets, financial position, profits from the last year, etc.
The current situation in Ukraine will also be constantly monitored. Since the beginning of the Russian invasion additional bank securities were required. However, since June 2023, this requirement was removed and there are no formal restrictions regarding short-term business. The insurance premium rate depends on the specific contract with the German exporter. For a short-term credit there is no specific minimum German content requirement.
In the last 2 months, Euler Hermes has received 380 applications, as a result goods worth 24 mln EUR by German providers were delivered to Ukraine. Since the beginning of the year, this sum amounts to even more impressive 100 mln EUR, including significant supplies for agribusiness.
Medium and long-term (“MLT”) business
The scheme can also be applied for a longer repayment term – starting from 360 days and up to 15 years. The requirement of minimum 51% German content is applied.
German ECA benefits include low financing cost (benefit from Germany’s international credit rating, lower interest rates, competitive overall cost structure), longer loan periods (ECA financing allows longer tenors and repayment periods, MLT transactions have repayment terms up to 15 years, even longer for certain sectors), and flexibility – excellent reputation and long-standing relationship with the bank, experience in different countries, various sectors, transaction sizes etc.)
Country cover policy for Ukraine
The country ceiling for Ukraine amounts to 250 mln EUR and there is a limit for individual transaction amounts to 10 mln EUR. Restrictive approach to cover local costs and foreign supplies is applied. Strict case by case risk due diligence is conducted on the basis of audited IFRS materials. In case of doubt bank collateral or state guarantees are required.
Please find more details and contacts of Euler Hermes in the presentation.
We are grateful to Thomas Baum, Susanne Barthmann, Michael Geske from Euler Hermes for great presentation of the program opportunities and for Mr. Schulze-Berge from Carl Geringhoff company for sharing his practical experience. We hope Ukrainian business along with German partners will benefit from the program!