GIEK assesses risk in each individual country, and its approach to issuing guarantees in support of exports to different countries varies.
What is meant by risk assessment?
GIEK assesses country risk where appropriate, and in many cases country risk is a decisive factor in premium calculation. During a country assessment, we look at overall payment risk in the country. The assessment includes economic and political factors that affect whether a country can and will respect its international payment obligations. Such factors may include foreign exchange shortages, war, civil war, expropriation, suspension of payments, transfer barriers or trade restrictions (an import or export ban, for example). Other aspects of a country’s ability to pay, including broad economic developments, are also assessed.
How does GIEK conduct its risk assessment?
GIEK uses a variety of sources, some of them public and others that are purchased, like rating agency reports. Through cooperation (and an agreement) in the OECD, an econometric model has been developed that assesses about 140 countries. Through that same cooperation GIEK has access to what guarantee institutes in other countries have experienced with regard to payment history in these 140 countries. A common system of country classification has also been created through the cooperation. When necessary, GIEK also conducts more narrowly focused studies of sectors, regions, etc.
These risk assessments concern only ability and willingness to pay in the countries reviewed, not the countries’ political and economic systems or whether recent developments have been constructive or desirable.