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15 December 2023

OECD officially extends 95% export finance coverage

Middle East & Africa, Americas, Asia-Pacific, Europe
The news the OECD has officially extended a Common Line agreement allowing ECAs to offer 95% coverage on export contracts is a boon for the export finance community — but not for the private insurance market.

The OECD has officially extended a Common Line agreement allowing ECAs to offer 95% coverage on export contracts. While the terms of the OECD Arrangement on Officially Supported Export Credits state that an export finance transaction must feature a downpayment of 15%, since 2021 a Common Line amendment has been in place. 

This allowed ECAs to reduce the downpayment to just 5% for sovereign buyers in the OECD risk categories 5-7. The ruling expired on 4 November but for a second consecutive year an agreement has been reached on an extension, with the new Line valid until 13 December 2024.

Most observers will welcome this news given the ongoing economic pressures facing buyers in emerging markets. The offer of 95% coverage makes ECA finance more accessible than ever as exporters and developers grapple with inflation and soaring costs. Voices in opposition have previously come from the private insurance industry, where some feel that ECAs are crowding out the market.

The OECD has continued to debate its export finance offering since the announcement of a package of reforms in April 2023. Among the headlines from this update were an extension of terms for projects under the Climate Change Sector Understanding to 22 years and an adjusted premium rate curve for longer repayment facilities and obligors with higher credit risk ratings. Recent reports have suggested that OECD participants are considering reforms that would end new ECA support for all fossil fuel projects.

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