Economics - Theses
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ItemExport credit insurance schemes and manufactured exports with particular reference to Australia 1960-1972( 1975)Credit insurance, which may be regarded as a part of casualty insurance, is a means of reducing the risk in credit operations, whether for domestic or overseas transactions. The terms “insurance” and "guarantee" are often used interchangeabley. For example, in Australia there is the Export Payments Insurance Corporation, and the counterpart organisation in the United Kingdom is the Export Credits Guarantee Department. The second half of the 19th century saw attempts by private companies in Europe to apply insurance principles to credit risks (domestic or domestic and export credit risks). But most were destined to failure because they considered it their duty not only to meet the claims of their clients but also to come to their financial assistance, so failing to distinguish between the function of insurance and banking. In Britain, Australia played a part in developing export credit insurance as it is now known when financial difficulties in Australia in the 1890's made British merchants shipping goods to Australia lose confidence in bills drawn on their Australian buyers. This led to a demand for insurance to cover the export credit risks. The few companies that were formed to meet this demand failed because they underwrote too many export risks and carried the whole of the loss, thereby giving the insured no inducement to limit his commitments. The risks in foreign trade covered by these private companies in the 19th century were only commercial risks with political risks excluded because of their large potential losses. Commercial risks refer to the financial position of the importer and his ability to meet the debts when due, whilst political risks relate to factors beyond the control of the importer, such as war in his country, which prevent payment. The reasons for the failure of credit insurance in Britain were not lost on Mr. Cuthbert Heath, a member of Lloyd's, and it was he who formulated the two basic principles upon which credit insurance (whether domestic or overseas) is now based. These were: (1) the risks covered must be a genuine average of all risks; and (2) cover should not be provided for the whole of the credit risk. He appeared on the credit insurance scene near the end of the 19th century, although it was not until 1903 that the Excess Insurance Company, established by him in 1894, commenced underwriting credit insurance. (From Introduction)