Huge jump in claims from export industry

PUBLISHED : Friday, 29 April, 1994, 12:00am
UPDATED : Friday, 29 April, 1994, 12:00am

THE prolonged recession and devaluation of European currencies in 1992-93 led to a drastic leap in insurance claims from Hong Kong exporters, according to the Export Credit Insurance Corp (ECIC).

The ECIC, the government-owned statutory body set up to encourage export trade by providing export credit insurance to exporters, recorded a 48 per cent jump in claims payment to HK$51 million in its last financial year, ended March 31, 1994.

The recession and currency turmoil in Europe last year have led to increasing incidence of insolvencies and buyers defaulting payments.

Claims were paid to the major insured markets: the United States (32 per cent), Britain (30 per cent) and Germany (three per cent).

For the first time in five years, the total exports of goods and services insured showed a decline, albeit slightly, from $15.65 billion to $15.63 billion.

The insured export amount has been increasing steadily for the past five years.

Yet ECIC was able to recover $10 million from claims previously made, an increase of 59 per cent over 1992-93.

Because of the drastic increase in claims, the ECIC was expecting a break-even or slight surplus in last year's operation.

The actual result, which will take in all administrative expenses of the corporation, is still being audited.

Concomitant with the changing structure of the economy, insured re-exports accounted for $9.15 billion, about 59 per cent of the total insured business, an increase of 11 per cent over 1992-93.

External trade, which involved direct shipments from neighbouring countries such as China to overseas buyers, represented $1.4 million, or nine per cent of the total.

Despite the poor result, optimism about economic recovery in Hong Kong's major markets prompted the ECIC to project moderate growth of eight per cent in insured business in 1994-95.

''On the outlook for 1994-95, moderate growth in exports to the US and Britain is forecast as economic expansion in these countries continues,'' Alice Lai, ECIC's new commissioner, said.

However, the picture is not completely rosy. ''The gradual rise of US interest rates and import restrictions recently imposed by the European Union may adversely affect exports to these markets,'' the commissioner said.

The issue of renewal of China's Most Favoured Nation (MFN) status has brought an element of uncertainty because 59 per cent of ECIC business was re-export, most from China, said Robert Yeung, assistant commissioner.

With about 2,000 policyholders out of the 40,000 exporters in Hong Kong, the ECIC plans to keep closer contact with its clients to monitor their changing needs.

It will launch a new insurance product that covers companies which are not involved in direct export, but who sell goods to exporters.