Questions and answers on the impact of the Ukraine conflict on current and future SERV insurance cover


General

Does SERV insurance cover the impact of the conflict in Ukraine?

Under SERV insurance, SERV clients are covered against political risk, which also includes war or war-like events such as sanctions. In principle, SERV will therefore cover insured events under existing insurance policies where those events arise owing to a political risk. SERV is also in the process of contacting those of its clients whose SERV-insured business is affected by the current situation. It is happy to support and advise its clients in processing their export transactions to ensure optimal cover and to resolve any problems that may arise.

Sanctions

Does SERV also insure export transactions against the risk of sanctions?

Under SERV insurance, SERV clients are covered against political risk, which also includes sanctions. In principle, SERV will therefore cover insured events under existing insurance policies where those events arise owing to a political risk. All sanctions (whether Swiss or international) that can directly lead to an insured event are insured against.  

Definition: Sanctions

  • are extraordinary measures by states or organisations;
  • must have been unforeseeable at the moment SERV’s liability commenced;
  • must have directly brought about the claim.

For insured claims, sanctions must actually prevent a payment being accepted (by rendering it illegal), i.e., the creditor themselves would have to anticipate measures at the place of receipt of payment (it is assumed that the sanctioning authority would have access to the creditor at the place of receipt).


Does pre-shipment risk insurance cover sanctions?

Political risks are covered if they were not foreseeable when the insurance was taken out and if they are the direct cause of the impossibility/unreasonableness to continue production/delivery or of the non-payment of agreed costs.


Does supplier credit insurance cover sanctions?

Political risks are covered if they were not foreseeable when the insurance was taken out and if they are the direct cause of the foreign customer’s inability to meet an existing payment obligation, as well as where a payment may no longer be accepted in Switzerland as a result of sanctions. The sanctions must actually prevent a payment being accepted (by rendering it illegal), i.e., the creditor themselves would have to anticipate measures at the place of receipt of payment (it is assumed that the sanctioning authority would have access to the creditor at the place of receipt).


Does buyer credit insurance cover sanctions?

The sanctions must actually prevent a payment being accepted (by rendering it illegal), i.e., the creditor themselves would have to anticipate measures at the place of receipt of payment (it is assumed that the sanctioning authority would have access to the creditor at the place of receipt).

New transactions with Russia, Belarus or Ukraine

Belarus cover policy: what does ‘closed’ mean? Are there no exceptions?

As a matter of principle, SERV cannot currently offer insurance for any new transactions with Belarus. The ‘Ordinance on Measures against Belarus’ of 16 March 2022 does, however, allow for certain exceptions. SERV will thus continue to examine applications for new transactions with Belarus where:

  • the order value is under CHF 10 million and the exporter is an SME;
  • the transaction is for food or for goods intended for agricultural, medicinal or humanitarian purposes.

The policyholder must show which financial institutions are involved in the payment flow and must plausibly establish that those institutions will be in a position to transfer or accept payments.


Ukraine cover policy: what does ‘on request’ mean?

Owing to the current situation, SERV believes that the likelihood of payment defaults occurring is very high. New cover will therefore be considered solely for applications with an exceptional credit rating and guaranteed payment methods.


Russia cover policy: what does ‘closed’ mean? Are there no exceptions?

As a matter of principle, SERV cannot currently offer insurance for any new transactions with Russia. The ‘Ordinance on Measures in connection with the Situation in Ukraine’ of 4 March 2022 does, however, allow for certain exceptions. SERV will thus continue to examine applications for new transactions with Russia where:

  • the order value is under CHF 10 million and the exporter is an SME;
  • the transaction is for food or for goods intended for agricultural, medicinal or humanitarian purposes.

The policyholder must show which financial institutions are involved in the payment flow and must plausibly establish that those institutions will be in a position to transfer or accept payments.


We have a valid Insurance Commitment in Principle for an export transaction to Russia. Can we still apply to have it converted?

For the time being, SERV cannot issue any insurance policies based on Insurance Commitments in Principle. Current Swiss sanctions prohibit SERV from providing export risk insurance for trade with the Russian Federation (cf. Art. 17 of the Ordinance on Measures in connection with the Situation in Ukraine). If the export transaction falls under one of the exceptions set out therein, SERV can re-examine the application (see previous question).


What does SERV mean by ‘guaranteed payment method’? What exactly does the policyholder have to establish?

The policyholder must show which financial institutions are involved in the payment flow and must plausibly establish that those institutions will be in a position to transfer or accept payments.


How does SERV evaluate insurance applications for new export credits in Russia, Belarus and Ukraine?

SERV will subject the risk subjects in the affected countries to a stringent examination based on strict criteria, as for every country for which it expects a heightened risk of credit default. A transaction will be recommended for cover solely where this examination reveals that the credit is very likely to be able to be repaid. SERV expects that it will increasingly become impossible to insure transactions from a risk perspective.

Ongoing transactions

What is the procedure when the debtor/buyer in Russia offers to pay in Russian roubles instead of in the contractually agreed currency?

The first step is to ascertain whether your bank can accept and convert the payment in roubles. In principle, payments in roubles are acceptable and are preferable to no payments at all. However, only the sum that is eventually paid into your account in the contractually agreed currency is relevant – no acknowledgement may be granted to the buyer/debtor that the debt has been settled other than on the basis of this amount. 

For example, if you are owed

  • a contractual debt of CHF 100,000
  • and are offered payment in RUB at an exchange rate of 1:130 (i.e., RUB 13 million),
  • you should not acknowledge this as payment of your debt, unless
  • CHF 100,000 is actually paid into your account following transfer and conversion. 

If, on the other hand, you receive less after transfer and conversion than you are owed under contract, you can apply to SERV to be compensated for this discrepancy.


What are the next steps for goods currently in production? We are just about to deliver – what should we do now?

Under the General Terms and Conditions, if there are risk-aggravating factors such as a conflict in the target country or foreseeable interruptions to payment flows, no further production and/or delivery may be carried out without SERV’s approval. Please contact SERV at your earliest convenience.