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  • Trade Policy Review: Switzerland and Liechtenstein May 18, 2022
    The sixth review of the trade policies and practices of Switzerland and Liechtenstein takes place on 18 and 20 May 2022. The basis for the review is a report by the WTO Secretariat and a report by the Governments of Switzerland and Liechtenstein.
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  • WTO launches new WTO data portal May 17, 2022
    The WTO has launched a new WTO data portal to provide easy access to key databases offering trade statistics and information on WTO members’ trade-related measures.
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  • Registration opens for virtual event on finance and trade lessons from COVID-19 pandemic May 17, 2022
    With the objective of supporting ongoing discussions about the finance and trade lessons learned from the COVID-19 pandemic over the past two years, the WTO is organizing a virtual event on 20 May 2022. Registration for the event is now open.
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  • Members review notification activity on national customs legislation May 17, 2022
    WTO members reviewed the status of notifications of national customs legislation as well as questions regarding that legislation at a meeting of the Committee on Customs Valuation on 17 May. Members also explored the possibility of organizing an experience-sharing session for a future meeting of the Committee and heard a WTO Secretariat presentation on the […]
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Exchange rate insurance



 

 

 

Exchange rate insurance could be a good way to neutralize potential risks resulting from adverse foreign currency fluctuations. Indeed, specialised insurance companies provide this kind of service to companies involved in International trade transactions.

This type of insurance could take the following forms:

 

Import-Export Exchange rate insurance.

When an Importer or an Exporter must receive or honour a payment in a foreign currency, they can benefit from Import-Export Exchange rate insurance. In this case the policyholder will secure a fixed exchange rate. A premium will be charged based on the currency covered and the length of the period considered.

Tender Exchange rate Insurance

During a Tendering process, an Exporter needs to have a fixed exchange rate in order to bid in the best conditions. Indeed, adverse currency fluctuations are likely to occur between the time when the bidding is assessed and the tender is awarded. This is where the tender Exchange rate insurance comes in as good way to cover this kind of risks. Indeed in this case the exchange rate is guaranteed during the whole period and as a result the Bidder can avoid uncertainties that might compromise the profitability of the project.

 

Fixed rate:

In this case, the insurance will charge a premium to the Importer or the Exporter, who in turn will benefit from a fixed exchange rate. As result, the policyholder prevent any currency risk which might impact his profit margin / procurement costs. However in this case it will not be possible to take advantage of favourable exchange rate evolution.

Fixed rate with shared profits.

Here the exchange rate is still guaranteed, but the potential gains resulting from favourable currency fluctuations are shared between the underwriter and the policyholder. The proportion in which profits are shared could vary from 70%/20% to 50%/ 50%.

However in both cases the risk is 100% covered

 

Please click on the links below for more hedging techniques