On 12 November 2009, the Dutch parliament adopted an amendment to the Framework Act on Financial Provisions by the Secretary of Finance (Kaderwet Financiële Verstrekkingen Financiën) (Framework Act). The revisions to the Framework Act shall be effective as per a date to be specified in a Royal Decree (Koninklijk Besluit) expected to be issued shortly. Such revisions will modify the Dutch Export Credit Insurance Facility (Exportkredietverzekeringsfaciliteit, EKV), the primary result of said modification being the further mitigation of the risks run by Dutch exporters and their financiers, such as banks.
The Dutch State currently offers a re-insurance facility to help mitigate risks run by Dutch exporters (and their financiers) in transactions involving export to less stable countries. In such transactions, exporters are able to insure their risks through the Dutch Export Credit Agency, Atradius Dutch State Business N.V. (Atradius). In turn, Atradius re-insures those risks with the Dutch State. As a result of this arrangement, the insurance risk effectively lies with the Dutch State and Atradius’ role appears in many ways to be limited to that of an agency charged with the execution of the EKV. The EKV scheme is intended to be complementary to the market in the sense that it provides an alternative in instances in which the commercial insurance market does not offer viable coverage.
Amendment to EKV
Upon the effective date of the revised Framework Act, the re-insurance facility will be converted into a system whereby Atradius’ apparent agency role will be formalized and the Dutch State will insure exporters directly.
The Explanatory Memorandum to the Framework Act emphasizes the main benefit to exporters and their financiers under this system: since the Dutch State provides insurance coverage directly, any credit risk pertaining to Atradius will be eliminated. It will therefore no longer be necessary for financial institutions to maintain any reserves in relation to transactions under the EKV.
It is also important to note that the new system will apply not only to future insurance under the EKV, but also to any existing EKV coverage. In other words, all existing policies with Atradius as insurer will be converted into policies with the Dutch State as insurer. All EKV insurance policies will, for that purpose, be transferred from Atradius to the Dutch State by operation of law.
Other amendments to the Framework Act include the formal introduction of means to mitigate and limit any risks to the insurer (the Dutch State) by, for instance, the use of swaps and re-insurance on the private market. This itself will not increase the funds available for the EKV facility, but it is meant to improve the effective financial management by the Dutch State of its risks in that regard.
International Economic Developments
Insurance coverage provided by Atradius for transactions between Dutch exporters and parties in the United Arab Emirates totaled EURO 1.3 billion in 2008, the highest amount for any country under the EKV program in that year. In light of recent economic developments in that region - in Dubai in particular - there are growing concerns of an increase in the number of claims made under the EKV, and, consequently, an increase in the amount of payments made. The fact that pursuant to the revised Framework Act the insurer will be the Dutch State, both with respect to future insurance policies and those already existing, should provide assurance that even in the event of the foregoing, all payment obligations under the EKV will be met.