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Business Underwriting Office

Rating countries, buyers, guarantors, exporters

SERV adheres to OECD guidelines to rate countries, buyers and guarantors.

Countries

The OECD classifies countries into Country Categories (CCa) 1 to 7 based on the level of risk in each country. Premiums are based on whichever country category applies at the time of the insurance commitment.

High-income OECD countries and euro area countries are in Country Category 0. In CCa 0, premiums for larger transactions (CHF 5 m and up) are based on current market prices (using interest margins, corporate bonds, credit default swaps etc.). For smaller transactions or if market prices cannot be determined, the country is assigned to a CCa 1 to 7 and the premium is calculated using the standard method.

Foreign buyers and guarantors

SERV distinguishes between sovereign and non-sovereign buyers and guarantors.

Sovereign buyers and guarantors include central banks, ministries of finance and, under certain circumstances, other ministries and public-law corporations. They are assigned to the "SOV" debtor category. Sovereign transactions do not incur an economic risk premium, i.e. the risk for these buyers and guarantors is considered identical to the political risk, also called the country risk.

All private-sector buyers and guarantors, banks and public-law institutions not included in the SOV category are considered non-sovereign buyers and guarantors. SERV rates non-sovereign buyers and guarantors based on the Standard & Poor's rating scale, which ranges from AAA (top creditworthiness) to D (default). Depending on their rating and country category, the non-sovereigns are assigned to a debtor category between CC0 and CC5 or SOV+ (CC stands for commercial category). The debtor category determines the amount of the economic risk premium.

Category CC0 comprises buyers and guarantors with sovereign-quality creditworthiness. They do not incur an economic risk premium. Category SOV+ comprises debtors who, according to SERV or a rating agency, are more creditworthy than the sovereign. SOV+ transactions do not incur economic risk premiums, and will additionally receive a reduction.

Exporters

The performance rating of the exporter represents the basis for calculating the premiums for counter garantees and working capital insurance. The rating levels go from P1 (best rating) to P5 (worst rating).

Adjusting premiums after changes in country categories or debtor ratings

If a country and/or debtor falls no more than one category in its classification during the validity period of an insurance commitment in principle (ICP), SERV will honour the original, lower premium until the ICP validity period expires.

SERV will, however, immediately take into account any improvement or any deterioration that spans several categories. After the issuance of the insurance policy, changes in the country category or debtor rating will only impact additional insurance or increases resulting from additional orders.

Version: 14.12.2011

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