a description of the two main areas within this sector: the

private sector insurance market mainly covering the shorter periods, and

the market for government$-$supported insurance, covering the longer

periods and$/$or more complex export markets.

It should be stressed that government$-$supported insurance schemes

through national export credit agencies $($ECAs or just $$agencies$)$ are

established in only about $40$ industrialized or emerging market countries

$($see separate box later in this chapter$),$ even though this covers a large

part of total world trade. However, the role of the agencies and the cover

they may give to promote exports from these countries are also of great

importance to buyers in most countries, since they fulfil an important role

in supporting the transfer of goods and services and, indirectly, provide

knowledge and expertise to many countries, particularly developing countries;

in many cases this would not have happened without this support.Insurance is based on a mutual relationship between the parties involved, where

both the insurer and the insured $($in this case the seller$)$ enter into obligations

towards one another. This is a major difference compared with a guarantee

or bond, which is a one$-$sided obligation based on specified conditions.

Many forms of export credit insurance have been created to cover different

parts of the transaction, for example coverage from shipment only or also

including the production period. Each insurance cover is based on special

terms and conditions, which the seller has to check with the preconditions

applicable to the individual transaction. The most common of these conditions

are related to the seller$$s own risk in the transaction, qualifying or waitingperiods or conditions precedent, for example that an L$/$C has been issued,

certain permissions in the buyer$$s country have been obtained or that certain

guarantees have been received by the seller.

However, the seller also has obligations towards the insurer; for example,

that the uninsured percentage should be retained during the whole insured

period or$,$ alternatively, that it might only be transferred under certain conditions. Other conditions could be that specified time limits must be adhered

to or adverse changes regarding the buyer or the transaction should be

reported, and$/$or that important changes to the transaction have to be

approved by the insurer.Risks not covered by export credit insurance

Export credit insurance cover is$,$ in principle, limited by three main factors:

$1$ the percentage of coverage, or inverted, the uninsured percentage that

the seller is not allowed to lay off to any third party; and

the qualifying period $$ the period before settlement of the claim takes place;

the settlement risk, and its rules, when invoicing in a foreign currency.

However, the seller should always go through all aspects of non$-$coverage

with the insurer, especially in situations where tailor$-$made coverage is needed.

When calculating the size and potential cost of these uncovered risks,

the seller must assume that the maximum risk occurs not only when delivery

obligations have been fulfilled but before receipt of the first payment from

the buyer. This risk also depends on whether delivery is in one or more

shipments, the buyer is to pay in one or more part$-$payments, and$/$or

separate credit terms are connected to the deal. However, the maximum

risk not covered by the insurance can always be determined in advance.

To calculate this risk and its inherent costs, the following factors have

to be considered, incl. any currency exchange risk$/$cost$,$ if applicable:

capital costs $$ the amount of capital not covered by the insurance,

which the seller has to retain at their own risk;

interest costs $$ interest on the uninsured parts of any credit given to the

buyer, calculated on estimated interest payments during the credit

period, multiplied by the average interest rate;

settlement costs $$ the interest due for the period before payment is

made under the insurance.Incorrect, misleading, changed or unreported circumstances may, in the worst case, lead to the insurance being reduced or revoked. The seller must also take reasonable action during the insurance period to prevent or mitigate potential damage or losses under the insurance. It is$,$ therefore, important for the seller to ensure that staff, who might not be aware of the conditions

of the insurance, do not make changes or give concessions to the buyer that

may jeopardize the insurance cover. This applies in particular to the longer

government$-$supported insurance. In the private sector insurance market,

the normal situation is that all the commercial buyers $($the debtors of the

insured seller$)$ are pre$-$evaluated and individual credit limits established for

each buyer. a$)$ what does the above paragraph imply about the "goods" covered by such export credits?

b$)$ What is the connection, if any, between such trade and "providing knowledge and expertise to many countries"?