Archiwa Export

KUKE, with the support of the Polish government and following the positive decision of the Export Insurance Policy Committee, reestablished the possibility of insuring receivables under export contracts with Ukrainian buyers. The insurance may cover goods or services excluded from the payment moratorium payment moratorium introduced on 24 February 2022 by the National Bank of Ukraine. The full list of is published on the website of the Ukrainian parliament.

“We see this as an important step in restoring trade between Poland and Ukraine, as well as a sign of solidarity with our neighbor in these trying times. We are glad that we are once again offering Polish exporters insurance cover for transactions with their Ukrainian business partners. We are currently restoring cover for exports of goods or services excluded from the payment moratorium introduced at the beginning of the war, which prevents Ukrainian entities from making foreign currency payments. The list of items not covered by the moratorium is wide-ranging and includes mainly basic necessities for the population, i.e. food, drugs, fuel and imports critical for the functioning of the country's economy, i.e. for the energy and security sectors”.
Janusz Władyczak, CEO and President of KUKE

The insurance is available both for companies that have already insured their receivables with KUKE and for those that have never worked with KUKE before. The insurance cover will be extended on the basis of the standard General terms and conditions of the Policy Beyond Borders credit insurance facility.

A Polish exporter who wants to deliver goods to a Ukrainian business partner should first agree with him whether the ordered goods are on the list of goods excluded from the payment moratorium. KUKE will also verify whether the Ukrainian business is active and whether the ordered products are excluded from the payment moratorium.

By the end of 2022, KUKE will be able to grant credit limits for Ukrainian companies worth PLN 500 million.

"Comparing this amount with the value of credit limits used by Polish exporters last year, and taking into account the volume of the current trade turnover, which is almost half lower than before the outbreak of the war, it seems that the needs of Polish entrepreneurs will be satisfied in the near future. We also hope that when analyzing the current situation and the uncertain market environment, exporters will see the advantages of the solutions offered by KUKE, ensuring protection, among other things, from political risk, such as the introduction of a payment moratorium, or the force majeure risk, such as war. We have recently cut the premium rates by 35 per cent for the Policy Beyond Borders credit insurance facility covering 160 market across the globe. This may encourage Polish companies to open up to new export new markets".
Janusz Władyczak, CEO and President of KUKE

In 2021, KUKE insured goods and services worth PLN 1.5 billion exported to the Ukrainian market, thus covering 5 per cent of total exports to Ukraine.

It is worth noting that only a few European export credit agencies allow for limited insurance of sales to Ukrainian, which puts Poland in the forefront of countries actively supporting both its business and the economy of Ukraine.

What with the return of the freedom to travel after the pandemic, Polish tourists visiting Madrid will be able to get around Spain’s capital on buses made by the Polish company Solaris. The company has just won a contract for the supply of 250 natural gas (CNG) vehicles to EMT, a company providing public transport bus services in the Spanish capital. A year earlier, Solaris won a tender for the supply of 30 vehicles to Barcelona. In both cases, Solaris competed against other producers with the financial support of KUKE and Santander Bank Polska.

“Solaris is a well-recognised brand not only in Poland and is winning tenders across Europe, becoming an increasingly significant Polish exporter. At KUKE, we have tailored a solution securing the company’s export contracts, which often require guarantees issued by local banks. KUKE assumes the risks from such institutions. When it comes to contracts for the supply of Solaris buses to Madrid and Barcelona, we applied such a solution together with the Santander Group,” explains Kinga Zychowicz from the Insurance and International Cooperation Department at KUKE.

The contract in Madrid is worth EUR 68.6 million, while the one in Barcelona is worth EUR 10.4 million.

“Bank guarantees are an important element of Solaris’ operations. Working with KUKE, we gave our client a guarantee facility corresponding to its advanced needs. We’re tremendously pleased that we could combine forces with KUKE and harness the experience and strong market position of the banks of the Santander Group both in Poland and in Spain. We’re convinced that this is a solution that we will continue to successfully use in many other export markets of our Clients,” Jacek Moćko, Trade Finance Manager at Santander Bank Polska, asserts.

Last year, Solaris signed an agreement with the Management Board of the Municipal Bus Transport Company in Warsaw for the supply of 70 natural gas (CNG) vehicles to Poland’s capital. The value of the contract, which was supported by KUKE’s contract performance bond, was PLN 116 million.

KUKE has for years been supporting projects executed by Polish entrepreneurs outside Poland’s borders, both by granting direct guarantees and counter-guarantees to the guarantees issued by banks. The insurer recently modified its offering for export contract guarantees granted with the support of the State Treasury, simplifying the procedures involved and the documentation requirements and extending the scope of the goods and services covered by it, as well as their application possibilities.

“KUKE guarantees present advantages to both the exporter and the banks financing them, be they Polish or foreign. Thanks to KUKE’s counter-guarantees, a bank can secure up to 80 percent of its commitments, thereby reducing its risk under a single guarantee to a mere 20 percent or, while maintaining the original risk level, it can increase its limit fivefold per exporter. In effect, the exporter is capable of acquiring further funding for growth and development,” asserts Kinga Zychowicz from KUKE.

In 2020, KUKE supported 62 export projects worth over PLN 5 billion with its guarantees. The total sum of granted guarantees has grown dynamically in recent years. In 2019, it came to PLN 395 million, and – despite the pandemic – reached PLN 460 million the following year.

“Solaris is a well-recognised brand not only in Poland and is winning tenders across Europe, becoming an increasingly significant Polish exporter. At KUKE, we have tailored a solution securing the company’s export contracts, which often require guarantees issued by local banks. KUKE assumes the risks from such institutions. When it comes to contracts for the supply of Solaris buses to Madrid and Barcelona, we applied such a solution together with the Santander Group,” explains Kinga Zychowicz from the Insurance and International Cooperation Department at KUKE.

The contract in Madrid is worth EUR 68.6 million, while the one in Barcelona is worth EUR 10.4 million.

“Bank guarantees are an important element of Solaris’ operations. Working with KUKE, we gave our client a guarantee facility corresponding to its advanced needs. We’re tremendously pleased that we could combine forces with KUKE and harness the experience and strong market position of the banks of the Santander Group both in Poland and in Spain. We’re convinced that this is a solution that we will continue to successfully use in many other export markets of our Clients,” Jacek Moćko, Trade Finance Manager at Santander Bank Polska, asserts.

“KUKE guarantees present advantages to both the exporter and the banks financing them, be they Polish or foreign. Thanks to KUKE’s counter-guarantees, a bank can secure up to 80 percent of its commitments, thereby reducing its risk under a single guarantee to a mere 20 percent or, while maintaining the original risk level, it can increase its limit fivefold per exporter. In effect, the exporter is capable of acquiring further funding for growth and development,” asserts Kinga Zychowicz from KUKE.

150 exporters benefited in Q1 2021 from GAP EX and GAP EX+ insurance made available by KUKE for the duration of the pandemic. They despatched their products to approximately 700 counterparties from 33 countries. The largest sales were to customers from the UK (16%), Italy and France (14%) and Germany (13%). The top 10 also includes four countries in our region: Romania, the Czech Republic, Slovakia, and Hungary.

GAP EX solutions are guaranteed by the State Treasury and are designed for exporters who are unable to find insurance on a commercial basis for their existing contracts or wish to increase international sales. The insurance covers European Union countries and selected nine OECD markets such as the United States, Norway, and Australia.

"We estimate that GAP EX solutions have so far insured exports worth almost two billion PLN. This mainly concerns EU countries, although statistics from recent weeks show that despite the problems resulting from Brexit, which significantly weakened the trade exchange with Great Britain at the beginning of the year, Polish entrepreneurs, e.g., from the furniture industry, are still fighting for the local market. So, there is a chance that within a few months exports to the British Isles will return to their previous levels", said Elżbieta Kacprzykowska, Director of KUKE's Sales Department.

The plastics industry accounted for almost one-fifth of coverage under GAP EX and GAP EX+ policies in value terms in Q1 2021, an increase of almost fifty per cent compared to 2020. Metallurgy accounted for 12% of the value of policies, while the food and automotive industry accounted for over 8% each. The wood and furniture sectors had a total share of 10%. Transport, construction, and electrical engineering companies were also keen to use our insurance.

"Acceptance of customers' credit limit applications is higher this year than last year, although our approach to risk has not changed. However, we see that the GAP EX portfolio is safe, with a minimum number of reported claims. Improving economic forecasts are announced for the developed countries. On the other hand, there is a risk that with the upcoming withdrawal of business aid programmes there will be more bankruptcies and restructurings, also among our exporters' counterparties", emphasised Elżbieta Kacprzykowska.

The European Commission has extended until the end of December 2021 the possibility for state guarantees to be provided to insure short-term export credits relating to Union markets and selected OECD countries under instruments such as GAP EX and GAP EX+.

According to a survey conducted by the Berne Union in the first quarter of the year, export credit agencies and private credit insurers expect an increase in the value of claims paid out. This means that, thanks to the protective measures introduced by most governments, the scale of the problems caused by the pandemic has diminished, although it has not been possible to eliminate them entirely. On the other hand, insurers, especially State-owned insurers, are ready to increase their exposure and support international trade.

It was not only the pandemic and its consequences for the global economy that made export business exceptionally difficult last year. Apart from new types of insurance protecting export receivables, KUKE adapted its offer of contractual guarantees granted with the support of the State Treasury to the changed market conditions. The related procedures and documentary requirements have been simplified, the scope of goods and services covered, and the possibilities of their use have been significantly expanded. Using KUKE guarantees strengthens exporters’ financial capacity, positively influencing their relations with financing banks and enabling them to significantly increase the scale of their operations.

“It hardly ever happens that the purchaser of goods or services does not request a financial security in case of problems with contract performance. Contract guarantees are a common method of securing the performance of contracts in domestic and foreign trade. KUKE has been providing such guarantees for years. The emerging challenges in international trade caused by the coronavirus and the changing market realities encouraged us last year to make significant modifications to our contract guarantees offer in order to strengthen the capabilities of Polish exporters in competing with competitors from other countries supported by their governments”, said Piotr Maciaszek, Director of the Insurance, and International Cooperation Department at KUKE.

The most frequently issued contract guarantees include performance bonds, warranty bonds and advance payment bonds. Several hundred Polish companies have benefitted from guarantees issued by KUKE - from small companies, acquiring guarantees for several thousand Euros, to large enterprises, where the guarantee amount reached several hundred million Euros. KUKE cooperates with entities from various industries, including energy, transport, shipbuilding, and construction.

“Our instruments guaranteed by the State Treasury are used by companies entering into contracts primarily in the European Union, but also in other developed and developing countries, including in high-risk markets. The contracting party may be a public or private entity. Thanks to recently introduced modifications concerning guarantees, they may be used jointly by members of a consortium, which, apart from a Polish company, also includes entities from the local market. We have done away with the existing documentary obligations, making the process of obtaining guarantees faster and simpler” - emphasised Piotr Maciaszek.

KUKE guarantees bring measurable benefits to the exporter as well as to the financing bank. The latter, using KUKE's counter-guarantee, which secures up to 80 percent of the assumed liability, can reduce its risk of a single guarantee to as little as 20 percent, or, while maintaining the original level of risk, can increase its limit per exporter fivefold. As a result, the exporter is able to raise further financing for its development. This solution extends the financial potential of all parties involved.

“KUKE’s guarantees can be a very useful solution for banks. They make it possible, in accordance with prudential regulations, to assign even zero risk weight, thus making it possible to provide further support to clients. The possibility of issuing guarantees in the form of counter-guarantees for domestic and foreign banks and insurance companies, the availability of guarantees both in Polish zloty and in other convertible currencies, and above all the clear mechanism for exercising rights under the guarantee ensure the attractiveness of this instrument. It can be an important element of support for the development of exports, and thus for the Polish economy”, emphasised Michał Mężykowski, partner, head of the banking and finance team at CMS.

In 2020, KUKE supported 62 projects worth more than PLN 5 billion implemented by Polish entrepreneurs outside our country, either by issuing direct guarantees or counter-guarantees for guarantees issued by banks. The total amount of guarantees issued has been growing rapidly in recent years. In 2019, it amounted to PLN 395 million and a year later - despite the pandemic – it increased to PLN 460 million. The export guarantee portfolio has for years been dominated by guarantees granted to the shipbuilding industry, which boasts contracts in such demanding markets as Norway, France, and Canada. Other key sectors which use the collateral offered by KUKE when securing contracts include construction and means of transport.

KUKE will in the coming period introduce further financial solutions under the new export support system, including, among others, guarantees for financing investment projects in Poland for exporters, guarantees for repayment of working capital credits and insurance of repayment of credits for takeovers or acquisitions of enterprises abroad, cooperating with CMS law firm in the area of documentation for clients.

KUKE introduced such a solution in mid-March last year, when the sweeping coronavirus epidemic started to globally upset business activity and investments. Entrepreneurs from different sectors took advantage of this solution.

"e initially provided 100 percent cover for investment export projects until the end of 2020. And despite the fact that the situation has slowly began to stabilise and the economic prospects for the world have started to look brighter, it only seems right to extend this support for Polish firms operating on foreign markets by continuing to provide such solutions until the end of the year. This means that KUKE, by insuring various kinds of investment transactions, is assuming all the risks entailed, both trade and political. In consequence, the Polish exporter now has much easier access to refinancing of contracts or financing for its own counterparties using credit facilities provided by banks, with maturities of two years and longer", Piotr Maciaszek, Director of the KUKE Department of Insurance and International Cooperation, explains.

The former practice in this respect at KUKE was to require sharing the trade risk at a level of at least 5 percent of the insurance sum. It is common for investment contracts to be worth many millions of euro, which is why any share in the risk can be acutely felt from the point of view of the execution of the export transaction.

"The global meltdown caused by the pandemic led to the slowing of most transboundary projects and investments on foreign markets, and destabilised global exports. Polish exporters of capital goods who applied for KUKE insurance were also less active. Nevertheless, we still managed to successfully provide support to contracts in African markets and in Eastern European countries, which included 100% risk assumption. This year, we can expect a rebound in these types of transactions due to the greater optimism of entrepreneurs; although one must not lose sight of the fact that the risk still remains very high on many markets", Piotr Maciaszek emphasises.

The main aim of this extension of insurance protection is to support banks in their continued financing of investment export projects. KUKE assumes all of the transaction risk involved, thanks to which banks will not have to establish reserves related to their own share in the risk.

Export projects relating to investments in KUKE’s portfolio mainly consist of turnkey construction service projects, the supply of machinery, production lines, and means of transport, and the broad shipbuilding industry. The acquisition or contracts in such sectors is strictly linked to securing financing from banks, which has been limited during this period of uncertainty in the global economy.

We are taking on full 100% of both commercial and political risk from exporters and banks financing or refinancing export transactions. This change will affect all new export projects with credit repayment terms of two and more years. The new policy is effective as of today until the end of 2020, subject to extension.

The main reason behind introducing the new policy is to encourage banks to continue to support and finance export projects. KUKE will take on the entire transactional risk, thanks to which banks will not have to create reserves against the potential risk of default by a foreign buyer subject to the contract. Until now, the usual practice by KUKE was to cover from 90 to 95 percent of the contract value. Considering the value of such export projects, reaching tens of millions of euros, the sum of reserves to be made was also considerable.

KUKE’s portfolio of projects concerning the exports of capital goods consist mainly of deliveries of “turn key” construction projects, machines and machinery, means of transport (both rail and road), as well as contracts carried out by the ship making industry. In order to successfully acquire new export contracts in these sectors of industry it is crucial to secure adequate bank financing. This will be increasingly difficult in the unstable and volatile global economic environment.