IASPS - News Behind the News

August 17, 2001

IFTRIC: Israel's Export Credit Insurance Monopoly

The Jerusalem Post and Maariv reported on August 15 that the HSBC bank had reached an agreement to issue export credit insurance based on IFTRIC’s approving. IFTRIC is the Israeli state monopoly on export credit insurance.

Just as in other industries, such as water, electricity, telephone service, standards, auto insurance, and so forth, the Israeli government holds a monopoly on export credit insurance. Plans to privatize short term insurance have been bandied about for three years now with the state still holding the monopoly.

The same day that the Post and Maariv reported HSBC’s move, which was presented as a boon to exporters who would now have more credit insurance available to them, IASPS published in Israel Policy Studies no. 48,  “Israel’s Export Credit Insurance Market,” by IASPS Koret Fellow Alex Braido.

On page 14 of the study, Braido notes that one of the effects of the state monopoly has been to prevent the development of alternate financing tools such as factoring and letters of credit for the financing bank. Here are one or two sentences that put the media stories on HSBC/IFTRIC in a different light:

“In the early 1990s many exporters in Israel tried to obtain bank financing for overseas credit transactions. They did this because IFTRIC was effectively the sole guarantor in the export credit market and its insurance capacity was inadequate....

“…IFTRIC and Citibank have an agreement allowing Citibank to finance approved IFTRIC-backed transactions.  Citibank Israel CEO Nandan Mar said: ‘The Citibank branch, and the Structured Trade Finance Group, view IFTRIC’s program as a basic product for the bank’s domestic activities.’

“...This raises the question, what does an exporter do when IFTRIC, for  reasons…such as trade distortions, does not back him?”