Commercial risks are those associated with the debtor of the transaction (the buyer). This covers:
1. Insolvency of the debtor, meaning:
Announcement of the debtor in bankruptcy or opening of insolvency proceedings;
Announcement of the debtor in liquidation or opening a liquidation procedure;
Other court or out-of-court settlement of the debtor’s obligations.
2. Delay in payment by the debtor of a due payment under the contract for more than the specified waiting period for reasons not related to the fulfillment of the terms of the contract by the supplier.
Political risks are the risks associated with the state of the debtor under the transaction (buyer). They include:
- The emergence of political events such as war, coup, civil unrest, riots, strikes, embargo, and natural disasters or other events of comparable effect;
Announcement of a common moratorium on payments;
Changes in the regime of currency payments;
Adoption or amendment of statutory instruments or decisions of the government or other public authority;
Confiscation or nationalization;
Refusal to pay or overdue the due payment for more than 3 months when the debtor is a foreign state or a foreign state authority;
Restrictions or prohibitions on the export of goods or services in fulfillment of obligations under international treaties to which Bulgaria is a party.
Short-term risk is the risk of contracts for the sale of goods and services with a deferred payment period of up to 2 years.
Mid-term risk is the risk of contracts with a 2 to 5-year deferral period, and long-term risk arises when there is a deferred payment period of over 5 years.
The investment risks are those that are related to the realization of the Bulgarian investment abroad. They are:
- Inability to convert the investment income denominated in the national currency of the host country into a freely convertible currency and the impossibility of transferring payments to the Republic of Bulgaria. These risks must arise from new restrictions prohibiting the conversion and transfer of payments arising from the insured investment both from the host State and / or from third countries;
Nationalization, confiscation or expropriation of a foreign company, including expropriation by a government act that deprives the investor of his fundamental rights in relation to the investment for an uninterrupted period of at least six months;
Politically motivated acts of violence such as war, revolution, insurrection, revolt and civil disobedience (politically motivated terrorist attacks and sabotage).
Letter of Liability
The Lender’s risk relates to a default and / or denial of the issuing bank when it has no right or reason under the terms and conditions of the Letter of Liability to accept to fulfill its obligations to pay the insured at the respective maturities.
Risks to the bank guarantee
The risks under the bank guarantee include:
1. Unwarranted use of the guarantee:
Unjustified assimilation of the guarantee by the beneficiary without the principal having breached his obligations under the export contract or the obligations arising from the tender /
Political and other non-commercial risks arising from political and economic events and measures in the country of residence of the beneficiary or in any third country which, in relation to the beneficiary, are force majeure and have led to the unjustified use of the guarantee. It is also unwarranted to assume the warranty for any of the following reasons:
Political events occurring in the country at the headquarters of the beneficiary such as war, civil war, revolution, uprising, civil riots, strike, etc.
Administrative decisions of the authorities in the country of the beneficiary’s registered office.
Administrative and policy measures in third countries where the export contract is being executed or the tender / competition is conducted.
Natural disasters that have made it impossible to fulfill the export contract or to carry out the tender / contest.
2. Underwriting of the guarantee – if the insured person has suffered damage as a result of the fact that the principal has not fulfilled his obligations arising from the export contract or from the tender / contest, the beneficiary has assimilated the guarantee in whole or in part.