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RSS World Trade Organization — Latest news

  • Costa Rica initiates dispute complaint against food import restrictions imposed by Panama January 14, 2021
    Costa Rica has requested WTO dispute consultations with Panama regarding measures imposed by Panama that restrict or prohibit the import of products such as strawberries, dairy products, meat products, pineapples and bananas from Costa Rica. The request was circulated to WTO members on 14 January.
    WTO
  • DDG Wolff: Focused WTO talks needed on trade and climate change issues January 14, 2021
    Speaking at a webinar hosted by the French Association of Large Companies (AFEP) on 14 January, Deputy Director-General Alan Wolff said WTO members need to engage in focused and constructive discussions on how to ensure that trade and trade-related measures contribute effectively to global ambitions on climate change. “Conflicts will arise” if actions such as […]
    WTO
  • WTO, OECD launch dataset on bilateral trade in services January 13, 2021
    The WTO and the Organisation for Economic Co-operation and Development (OECD) on 13 January jointly launched a new dataset covering bilateral services trade of over 200 economies from 2005 to 2019. The WTO-OECD Balanced Trade in Services (BaTIS) dataset, which provides detailed data for 12 services sectors in addition to total commercial services, offers a […]
    WTO
  • DDG Wolff outlines possible responses to calls for WTO reform January 13, 2021
    At a virtual event hosted by Chatham House in London on 13 January, Deputy Director-General Alan Wolff outlined his views on possible responses to calls for reform of the WTO. He focused on issues such as improving the WTO’s negotiating function and decision-making, better accountability in dispute settlement, and other structural reforms. “The status quo […]
    WTO

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