Swiss Export Risk Insurance SERV, Project Finance And Capital Markets - A Challenging Combination

Author:Mr Peter Hsu and Sandro Fehlmann
Profession:Baer & Karrer
 
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  1. Introduction

    Insurance products of the Swiss Export Risk Insurance SERV («SERV»), the Export Credit Agency («ECA») of Switzerland, have become increasingly popular as a component of large project finance transactions. In Decem- ber 2018, the significant increase of the coverage volume prompted the Swiss Federal Council to increase the coverage ceiling from CHF 14 billion to CHF 16 billion to ensure that SERV could continue to meet the needs of businesses across a wide range of sectors by protecting Swiss exporters from defaults of theirclients and facilitating export financing through the provision of insurance to lenders. Moreover, large scale transactions have become more common. Outside of the exporting industry, still only a relatively narrow circle of bankers, experts and lawyers are familiar with ECA covered transactions, including SERV insured transactions. Furthermore, even though ECAs, including SERV and its predecessor organization Export Risk Guarantee («ERG») in Switzerland, have been in existence around the globe for decades, it appears — based on the number and type of as well as increasing demand for ECA covered transactions — that export businesses have not yet fully utilised their potential benefits.

    In a recent large-scale transaction, a SERV insured project financing was combined with capital market financing. To reconcile the differing requirements of the two types of financing, the transaction had to be structured in a complex manner. It remains to be seen whether such an innovative combined capital market financed SERV insured project financing will become a new phenomenon and provide for an alternative way to promote export business in times of increasing regional first considerations.

    This abstract revisits some of the basic principles of SERV and its product portfolio, illustrates typical structures and features of ECA covered project financing transactions and, finally, explores the challenges and potential solutions for combined capital market financed SERV insured project financing transactions.

  2. Swiss Export Risk Insurance SERV

    1. SERV as a Facilitator for the Swiss Export Business

      SERV is an important facilitator for the Swiss export business: it issued 934 insurance policies and insurance commitments in 2018 and its overall insurance obligations at the end of 2018 amounted to CHF 11.4 billion. Furthermore, SERV's premium revenues reached CHF 94 million in 2018 (compared to CHF 64 million in 2017).

      The...

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