For each insurance application received in ASHRA, we perform a risk assessment of the non-payment in the associated transaction.
This risk assessment is based on two main components:
- Assessment of political risk (country risk assessment)
- Assessment of commercial risk.
ASHRA’s insurance premium is based on the risk assessments of both political and commercial events.
How does country risk assessment work?
Country risk assessment is mainly about estimating a country’s ability to transfer currency for foreign payments. This ability is determined by three main factors: political, economic and financial factors.
The country risk assessment involves weighing and estimating these factors in order to reach a conclusion regarding the country’s ability to pay.
In the country risk assessments we also weigh in the risks of action by the public authorities and the regulatory environment in the country under consideration, which may affect the individual transaction.
The country analyses are based on comprehensive source material from institutions such as the International Monetary Fund, the World Bank, credit rating agencies, consulting firms and Export Credit Agencies in the OECD.
ASHRA also takes part in the OECD’s annual risk classification meeting of over 140 countries. This classification is used to define the minimum premium for credit risk in each country.
Country Policy
The results of the country risk assessment are reflected in the country policy determined by ASHRA. The country policy is updated on a regular basis and it is based on ASHRA’s own risk assessment and on the minimum premium levels for political risk according to OECD regulation.
The country policy includes price information, expressed in country risk categories which are arranged on a scale range of 0-7: the lower the figure, the better the country’s creditworthiness. The country policy also provides information about ASHRA’s ability to insure transactions.
Remember: ASHRA’s ability to issue guarantees for a country may differ for different types of risk in that country.
