Export Insurance and ECGC — Protecting Your Export Business

International trade carries risks that domestic business does not. Your buyer in Nigeria might not pay after receiving the goods. A political crisis in your destination country could block your payment. Your container might fall off the ship or arrive with water damage. A sudden currency devaluation could wipe out your profit margin overnight.

Most Indian MSME exporters operate without adequate insurance until they get burned. A single non-payment of Rs 10-20 lakh can destroy a small exporter's working capital and, in many cases, their entire business. The insurance mechanisms exist to prevent this — marine cargo insurance for transit risks, and ECGC (Export Credit Guarantee Corporation) for buyer non-payment. Both are affordable, both are available to even the smallest exporters, and both are underutilised.

This guide covers the complete insurance landscape for Indian exporters — what policies you need, how much they cost, how to get them, and how to file claims when things go wrong.

Why Export Insurance Is Not Optional

Domestic trade has built-in safety nets. You know your buyers, you can visit their office, you can take legal action relatively easily, and the goods travel short distances with minimal handling. Export trade removes all of these safety nets:

Buyer default risk. Your buyer is in another country, under different laws, and legal action across borders is expensive and impractical for MSME-sized claims.

Political risk. Governments impose sanctions, freeze foreign exchange, or experience civil unrest — your goods or payments can get stuck.

Transit risk. Goods travel thousands of kilometres, handled multiple times, exposed to weather and theft. Damage and loss happen more frequently than most exporters realise.

Currency risk. Exchange rates move against you between quotation and payment, eroding margins.

Insurance cannot eliminate these risks, but for premium costs of 0.1-1.5% of shipment or turnover value, it ensures a single bad event does not destroy your business.

Types of Export Insurance

There are three distinct types of insurance that exporters need to understand:

Type	What It Covers	Who Provides It
Marine cargo insurance	Physical loss or damage to goods during transit	General insurance companies
Export credit insurance (ECGC)	Buyer non-payment (commercial and political risks)	ECGC Ltd (government-backed)
Political risk insurance	Government actions, war, sanctions, transfer restrictions	ECGC, MIGA (World Bank), private insurers

These are not interchangeable. Marine insurance does not cover buyer non-payment. ECGC does not cover physical damage to goods. You may need both, depending on your Incoterms and trade structure.

Marine Cargo Insurance

Marine cargo insurance covers physical loss or damage to your goods during international transit — by sea, air, or land. Despite the name "marine," it covers all modes of transport.

Institute Cargo Clauses

Marine cargo insurance policies worldwide follow the Institute Cargo Clauses (ICC), published by the Institute of London Underwriters. There are three levels:

Clause	Coverage Level	What Is Covered
ICC (A)	All risks	All risks of loss or damage except specific exclusions (war, strikes, inherent vice, wilful misconduct, delay)
ICC (B)	Named perils (broad)	Fire, explosion, vessel sinking/capsizing, collision, discharge at port of distress, earthquake, lightning, washing overboard, water entry to vessel/container
ICC (C)	Named perils (basic)	Fire, explosion, vessel sinking/capsizing, collision, discharge at port of distress, general average sacrifice

Which clause should you choose?

ICC (A) — All Risks is the standard for most export shipments. It covers the broadest range of events, including theft, pilferage, non-delivery, and damage from handling. The premium difference between ICC (A) and ICC (C) is minimal — typically 0.05-0.15% of cargo value — and the additional coverage is well worth it.

ICC (B) and ICC (C) are suitable only if you are shipping low-value bulk commodities where the insurance cost needs to be minimised, or if the buyer specifically requires a lower level of coverage.

Coverage Amount

The standard practice is to insure cargo at 110% of CIF value. The extra 10% covers incidental costs you would incur in a total loss — lost profit, re-procurement costs, and administrative expenses. Most insurance companies will insure up to 110% as standard, and up to 120% on request.

Premium Rates

Marine cargo insurance premiums depend on several factors:

Factor	Impact on Premium
Type of goods	Fragile, perishable, or hazardous goods cost more to insure
Packaging quality	Well-packaged goods attract lower premiums
Mode of transport	Sea freight has higher premiums than air freight
Route	Piracy-prone routes (Gulf of Aden, West Africa) cost more
Claims history	A clean claims history earns discounts
Coverage level	ICC (A) is slightly more expensive than ICC (B) or (C)

Indicative premium rates:

• General manufactured goods: 0.10-0.20% of cargo value
• Agricultural products: 0.15-0.30% of cargo value
• Fragile/breakable goods: 0.25-0.50% of cargo value
• Perishable goods (reefer cargo): 0.30-0.50% of cargo value
• Hazardous chemicals: 0.30-0.60% of cargo value

For a shipment valued at Rs 20 lakh, a typical premium of 0.15% works out to just Rs 3,000. This is negligible compared to the potential loss.

Who Arranges Marine Insurance?

This depends entirely on the Incoterm agreed with your buyer. Refer to the Incoterms guide for the full breakdown.

Incoterm	Who Arranges Insurance
CIF (Cost, Insurance, Freight)	Seller must arrange and pay for insurance (minimum ICC (C) coverage)
CIP (Carriage and Insurance Paid To)	Seller must arrange and pay for insurance (minimum ICC (A) coverage)
FOB (Free on Board)	No obligation on either party, but buyer typically arranges
CFR (Cost and Freight)	No obligation on either party, but buyer typically arranges
EXW (Ex Works)	Buyer's responsibility entirely

Critical point for FOB sellers: Even under FOB terms where the buyer arranges insurance, your risk exists until the goods are loaded on the vessel. If your goods are damaged in the truck on the way to the port, or at the CFS before loading, the buyer's marine insurance has not kicked in yet. Consider taking an inland transit policy to cover this gap.

Marine Insurance Providers in India

Major public sector providers include New India Assurance (largest marine portfolio), United India Insurance, and Oriental Insurance — they offer competitive premiums. Private sector options like ICICI Lombard, HDFC ERGO, Bajaj Allianz, and Tata AIG offer faster digital processes and quicker claims settlement. Compare quotes from at least one public and one private insurer.

Marine Insurance Claims Process

If your cargo is damaged or lost during transit: (1) Notify the insurance company within 24-48 hours — late notification can lead to claim rejection. (2) Preserve all damaged goods and packaging for survey inspection. (3) The insurer appoints a surveyor to inspect and assess the loss. (4) Submit documentation: original policy, BL/AWB, commercial invoice, packing list, survey report, carrier's delivery receipt noting damage, photographs, and claim computation. (5) Settlement typically takes 30-90 days for straightforward claims after receiving complete documentation.

ECGC — Export Credit Guarantee Corporation of India

ECGC Ltd is a government-backed organisation under the Ministry of Commerce and Industry that provides credit insurance to Indian exporters. While marine insurance covers physical damage to goods, ECGC covers the far more devastating risk: your buyer not paying you. Operating since 1957, its mandate is to support Indian exports by providing affordable credit risk coverage.

What ECGC Covers

ECGC policies cover two categories of risk:

Commercial risks:

• Buyer insolvency (bankruptcy, liquidation)
• Buyer's protracted default (buyer simply does not pay despite repeated demands)
• Buyer's failure to accept goods that have been shipped

Political risks:

• Imposition of trade restrictions or sanctions by the buyer's government
• War, civil war, revolution in the buyer's country
• Government actions preventing transfer of payment (foreign exchange restrictions)
• Cancellation of a valid import licence in the buyer's country

ECGC Policy Types

ECGC offers several policy types designed for different exporter profiles:

Standard Policy (Shipments Comprehensive Risks)

This is the most common ECGC policy. It covers all your export shipments during the policy period (typically one year) against both commercial and political risks.

Feature	Details
Suitable for	Regular exporters with multiple buyers and markets
Coverage	90% of loss for commercial risks, 95% for political risks
Credit period covered	Up to 180 days from date of shipment
Premium	Based on your export turnover, country spread, and buyer mix
Minimum premium	Rs 10,000 per year for small exporters

The 90%/95% coverage means you always bear 10% or 5% of the loss. This co-insurance ensures exporters maintain their own due diligence on buyers rather than becoming reckless because they are insured.

Small Exporter's Policy

Designed specifically for MSMEs with annual export turnover up to Rs 5 crore.

Feature	Details
Suitable for	New and small exporters
Coverage	95% for both commercial and political risks
Premium	Simplified, lower rates than Standard Policy
Advantages	Easier application, higher coverage percentage, lower minimum premium

If your turnover is below Rs 5 crore, this is the policy to start with. The higher coverage (95% vs 90% for commercial risks) and simpler process make it ideal for MSMEs.

Specific Shipment Policy (Short-term)

Covers a single specific shipment rather than your entire turnover.

Feature	Details
Suitable for	Exporters with occasional large shipments
Coverage	90% commercial, 95% political
Premium	Based on invoice value of the specific shipment
Use case	When you receive a one-time large order and want specific coverage

Export Turnover Policy

For established exporters with predictable, regular shipments. Premium is calculated as a percentage of your projected annual export turnover, simplifying the process.

Buyer-specific Policy

Covers your exposure to one specific buyer. Useful when you have a concentrated buyer relationship where a single non-payment would significantly impact your business.

ECGC Premium Rates

Premium rates depend on the country of the buyer, the buyer's creditworthiness, the payment terms, and the exporter's claims history.

Factor	Impact
Country risk classification	Countries rated A (low risk) to D (high risk) — higher risk = higher premium
Buyer credit rating	Better-rated buyers attract lower premiums
Payment terms	Longer credit periods attract higher premiums
Exporter's claims history	Clean history earns premium discounts up to 20%
Product type	Some products carry higher default risk

Indicative premium rates: 0.40-1.50% of invoice value, depending on the above factors. For a shipment of Rs 10 lakh to a well-rated buyer in the UAE (a low-risk country), premium could be around Rs 4,000-6,000. For a shipment to a new buyer in a higher-risk African country, it could be Rs 10,000-15,000.

ECGC Country Risk Classification

ECGC classifies countries into risk categories that directly affect your premium rates and credit limit approvals:

Category	Risk Level	Examples
A1	Insignificant risk	—
A2	Low risk	UAE, Singapore, Germany, Japan, Australia
B1	Moderate-low risk	Saudi Arabia, South Korea, Malaysia
B2	Moderate risk	Turkey, Brazil, South Africa, Mexico
C1	Moderate-high risk	Nigeria, Kenya, Egypt, Bangladesh
C2	High risk	Pakistan, Sri Lanka, Ethiopia
D	Very high risk	Countries under sanctions or severe instability

These classifications change periodically based on economic and political developments. Check the current classifications on the ECGC website before taking on new buyers in unfamiliar markets. Use the Market Finder and country export guides to understand your target markets.

Buyer Credit Limits

Before you ship to a new buyer under ECGC coverage, you must apply for a credit limit on that buyer. ECGC assesses the buyer's creditworthiness and assigns a maximum credit limit — the maximum amount of outstanding exposure ECGC will cover for that buyer.

The application requires the buyer's legal name, address, registration number, bank references, proposed credit terms, and estimated annual business volume. ECGC processes applications within 15-30 days and may approve the full amount, a lower amount, or decline coverage. If ECGC declines a buyer, treat it as a serious red flag — do not proceed with open credit terms.

ECGC for Bank Finance

This is one of the most important and least understood benefits of ECGC coverage. Banks use ECGC policies as collateral support when providing export finance.

Pre-shipment credit (packing credit): With ECGC coverage, banks are more willing to provide working capital finance for manufacturing or procuring export goods because the payment risk is insured.

Post-shipment credit: ECGC coverage makes banks more willing to purchase or discount your export bills after shipment.

For new exporters: Many banks will not provide export credit to first-time exporters without ECGC coverage. The policy substitutes for the credit history you do not yet have. Get ECGC coverage first — it opens doors to bank finance.

ECGC also offers policies directly to banks (Whole Turnover Packing Credit Guarantee, Post-Shipment Credit Guarantee) that protect the bank against exporter default, further encouraging banks to lend.

Step-by-Step: Getting ECGC Coverage

Step 1: Register on the ECGC Portal

Visit ecgc.in and create an account. You will need your IEC (Import Export Code), PAN, company details, and bank account information.

Step 2: Choose the Appropriate Policy

For most MSME exporters, start with either:

• Small Exporter's Policy — if your turnover is below Rs 5 crore
• Standard Policy — if your turnover exceeds Rs 5 crore

If you are shipping a single large order and do not plan to export regularly, consider the Specific Shipment Policy.

Step 3: Submit Buyer Details for Credit Limit

For each buyer you plan to sell to on credit terms, submit a credit limit application. Provide the buyer's business details, bank references, and proposed credit terms. ECGC will assess the buyer and assign a credit limit.

You do not need a credit limit for advance payment buyers — ECGC coverage is only relevant when you are extending credit (payment after shipment).

Step 4: Pay Premium

Premium is payable at policy inception. For the Standard Policy, it is calculated based on your projected annual export turnover. For Specific Shipment policies, it is based on the shipment value.

Premium can be paid online through the ECGC portal. It is a deductible business expense for tax purposes.

Step 5: Obtain Policy

Once premium is paid and your application is approved, ECGC issues the policy document. Keep this safe — you will need it for bank finance applications and for filing claims.

Step 6: Report Shipments

You are required to declare all your export shipments to ECGC on a monthly basis. This is done through the online portal. Report the buyer name, country, invoice value, payment terms, and shipment date.

Failure to report shipments can void your coverage for those specific shipments. Make this a regular monthly task.

Step 7: Report Overdue Payments

This is critical and where many exporters fail. If a buyer does not pay within the credit period, you must report the overdue payment to ECGC within the specified timeframe (typically within one month of the due date). Late reporting can reduce your claim amount or void coverage entirely.

Step 8: File a Claim (If Needed)

If a buyer defaults, you can file a claim after the waiting period:

Risk Type	Waiting Period
Buyer insolvency	Immediately upon insolvency event
Buyer protracted default	4 months from due date
Political risk	Varies by event type (typically 4 months)

Submit the claim with supporting documents: original invoices, proof of shipment (BL or AWB), proof of non-payment, correspondence with the buyer demanding payment, and any legal notices sent.

ECGC processes claims and makes payment within 30-90 days of receiving complete documentation. They may also pursue recovery from the buyer and share any recovered amount with you.

Common Mistakes That Cost Exporters Their Insurance Coverage

Not getting ECGC before shipping to new markets. ECGC does not cover retrospective losses. You must have the policy and buyer credit limit approved before you ship.

Not reporting overdue payments on time. Exporters delay reporting, hoping the buyer will pay. By the time they report, the deadline has passed and the claim is reduced or rejected. Report immediately — you can withdraw if the buyer pays.

Assuming marine insurance covers payment default. Marine insurance covers physical damage. ECGC covers non-payment. These are completely different risks. If your buyer receives goods in perfect condition and refuses to pay, marine insurance will not help.

Not getting buyer credit limit before accepting large orders. ECGC would have flagged a buyer with a history of non-payment. Always get the credit limit approved before committing to ship.

Skipping insurance on FOB shipments. Under FOB, the buyer arranges marine insurance after loading. But your goods are uninsured during factory-to-port transit. Consider your own inland transit policy for high-value shipments.

Not reading policy exclusions. Marine insurance excludes inherent vice, delay, inadequate packaging, and wilful misconduct. ECGC excludes quality disputes, exchange rate fluctuations, and pre-existing debts. Know the exclusions before you need to claim.

Letting the policy lapse. If your policy lapses and you ship during the gap, you have no coverage. Set calendar reminders 30 days before renewal.

Cost Summary for MSME Exporters

Here is the total insurance cost for a typical MSME exporter with annual exports of Rs 1-5 crore:

Insurance Type	Annual Cost (Approximate)
ECGC Small Exporter's Policy	Rs 10,000-75,000 (0.4-1.5% of turnover)
Marine cargo insurance	Rs 3,000-10,000 per shipment (0.1-0.5% of cargo value)
Inland transit insurance	Rs 1,000-3,000 per shipment
Total annual insurance cost	Rs 25,000-1,50,000

Against an annual export turnover of Rs 1-5 crore, this amounts to 0.3-1.5% of revenue. Compare this to the potential loss of a single unpaid invoice (Rs 5-20 lakh or more for a typical shipment), and the value is clear.

Key Takeaways

• Export insurance has two distinct components: marine cargo insurance (transit damage) and ECGC (buyer non-payment) — you likely need both
• Marine insurance under ICC (A) All Risks is the standard choice, costing just 0.1-0.5% of cargo value
• ECGC covers 90-95% of losses from buyer default, including insolvency, protracted default, and political risks
• ECGC Small Exporter's Policy is ideal for MSMEs with turnover under Rs 5 crore — it offers 95% coverage with simplified procedures
• Always get ECGC buyer credit limits approved before shipping on credit terms to new buyers
• ECGC coverage is essential for obtaining bank finance — many banks require it for pre-shipment and post-shipment credit
• Report overdue payments to ECGC immediately — late reporting can void your claim
• Insurance is not optional — a single unpaid invoice can wipe out months of profit and destroy working capital

What to Do Next

1. Register on ecgc.in and apply for the Small Exporter's Policy if your turnover is under Rs 5 crore
2. Submit credit limit applications for your existing and prospective buyers
3. Get marine cargo insurance quotes from at least two providers — one public sector, one private sector
4. Review your Incoterms — check the Incoterms guide to understand your insurance obligations under different terms
5. Inform your bank about your ECGC coverage to improve your export finance terms
6. Set up a monthly process to report shipments to ECGC and flag overdue payments immediately
7. Read the LC guide — Letters of Credit are an alternative payment security mechanism that works alongside ECGC coverage
8. Use the Market Finder to identify target markets and cross-reference with ECGC country risk classifications

The cost of export insurance is a fraction of a percent of your revenue. The cost of not having it is potentially your entire business. Get covered before your first shipment, not after your first loss.