Export Credit Insurance Korea: How Much If a Buyer Defaults?

If an overseas buyer defaults and a Korean exporter holds K-SURE short-term export credit insurance (post-shipment), the payout is “(loss − exempt loss) × cover ratio”. For general exports the cover ratio is 100% for SMEs, 97.5% for mid-sized companies and 95% for large companies. Those ratios only apply to deals that were properly insured and notified, though, and country underwriting policies or exclusions can reduce what you actually receive. This guide walks through what is covered, how the payout is calculated, how to apply and which deadlines matter.

Key takeaways

• K-SURE short-term export insurance (post-shipment) covers losses when, after exporting under a contract with a payment term of two years or less, the exporter cannot collect from the importer (or, under a letter of credit, the issuing bank).
• It covers commercial risk on the buyer side (bankruptcy, insolvency, refusal or delay of payment) and political risk on the country side (import bans, war or civil unrest, transfer restrictions).
• Cover ratios for general exports and consignment processing trade are 100% for SMEs, 97.5% for mid-sized firms and 95% for large firms, and may vary under K-SURE’s country underwriting policy.
• Cover only starts once the exporter files an export notification. Under an individual policy that is within 10 business days of shipment; a shipment that is never notified is not covered.
• If a loss occurs, written notice of the loss is due within one month of the payment due date (or of learning about the cause).

What does K-SURE short-term export insurance cover?

Short-term export credit insurance (post-shipment) is K-SURE’s main product for Korean exporters. It pays when, after shipping under an export contract with a payment term of two years or less, the exporter cannot collect from the importer or the L/C issuing bank. It covers both commercial risk, such as a buyer going bankrupt or deliberately not paying, and political risk, such as import bans or restrictions on sending money out of the importing country. Because cover depends on an actual loss, only exports for payment qualify; free-of-charge shipments are excluded.

Eligible deals are general exports, consignment processing trade, intermediary trade and resale. In open-account deals (T/T, D/A, D/P) the importer’s credit is what K-SURE underwrites; in L/C deals it is the issuing bank’s.

Risk	Examples (per K-SURE’s glossary)
Commercial risk	Importer bankruptcy or insolvency, inability to pay after its finances worsen, deliberate delay or refusal of payment, unilateral cancellation of the contract
Political risk	Import bans or restrictions in the importing country, war, civil war, revolution, riots or strikes in the importing or a third country, exchange or remittance controls

How much do you get if the buyer defaults?

The claim payment is “(loss − exempt loss) × cover ratio”, capped at the insured amount (insured value × cover ratio). For general exports and consignment processing trade the cover ratio is 100% for SMEs, 97.5% for mid-sized enterprises and 95% for large companies. Intermediary trade and resale use separate ratios, and country underwriting policy can change the figure, so the ratio printed on your policy is the one that counts.

Item	What it means
Insured value	The export proceeds
Cover ratio (general export, consignment processing)	SME 100% / mid-sized 97.5% / large 95%
Insured amount (maximum payout)	Insured value × cover ratio
Claim payment	(Loss − exempt loss) × cover ratio
Premium	Insured amount × premium rate (set by the importer’s credit grade, payment term and other factors)

Here is a worked example with assumed numbers. They are for illustration only; the real amount depends on the policy terms and K-SURE’s assessment.

• Assumption: export proceeds of USD 100,000 entirely unpaid, exempt loss USD 0
• SME (100%): (100,000 − 0) × 100% = USD 100,000
• Mid-sized company (97.5%): (100,000 − 0) × 97.5% = USD 97,500
• Large company (95%): (100,000 − 0) × 95% = USD 95,000
• Same deal, SME, with USD 20,000 judged as exempt loss: (100,000 − 20,000) × 100% = USD 80,000

So even for an SME, “100%” is not guaranteed. Exempt losses come off first, and any export value above your underwriting limit cannot be insured in the first place.

Who can apply and what is the process?

The exporter must be a company with an address in Korea and a K-SURE exporter credit grade of F or better. The importer must not be in a country K-SURE restricts under its country underwriting policy and must hold a K-SURE importer grade of F or better. The process runs from credit checks and a limit application to shipment, export notification and premium payment, and shipments made before your limit is set are not covered, so apply while you are still negotiating the deal.

1. Request credit checks on yourself and the importer through K-SURE ON. K-SURE says an importer credit check takes about three weeks. For L/C deals, K-SURE checks whether it can accept the issuing bank instead of investigating the importer.
2. Apply for a limit and confirm the approval before you ship.
3. Ship the goods.
4. File the export notification: within 10 business days of shipment under an individual policy, or by the 20th of the month after shipment under a comprehensive policy.
5. Pay the premium by the 25th of the month after export (comprehensive policies: by the 10th of the second month after export).
6. When the buyer pays, file a payment notification. This restores the limit you used.

A policy stays valid for one year from the last export date (or one year from the limit date if nothing was exported). Premium rates and detailed conditions can change, so check the latest terms on K-SURE’s official website or with its customer centre before you apply.

How is an individual policy different from a comprehensive policy?

An individual policy lets you insure selected deals one by one, while a comprehensive policy covers every deal within a defined scope. Individual policies take payment terms up to two years; comprehensive policies take terms up to 180 days. Comprehensive cover has lower rates and makes high-risk deals easier to insure, but you must also insure your low-risk deals.

	Individual policy	Comprehensive policy
Scope	Deals chosen one by one (payment term up to 2 years)	All deals in the agreed scope (payment term up to 180 days)
Limit	Underwriting limit (value above it cannot be insured)	Indemnity limit (value above it can be insured, but payout stays within the limit)
Pros	Insure only the deals you want	Lower rates, easier for high-risk deals, monthly or annual export notification
Cons	Hard to insure high-risk deals, higher rates	Low-risk deals must be insured too

What must you do after a default, and by when?

If you are not paid, send K-SURE written notice of the loss within one month of the payment due date; if you learn of a covered cause earlier, for example the buyer filing for bankruptcy before the due date, notify within one month of learning about it. K-SURE then investigates, and it says that if you file the claim once a month has passed since your notice, payment is usually made within two months of the claim. Missing documents or a dispute between buyer and seller can stretch that timeline.

• Loss notices and claims can be filed online through K-SURE ON.
• Example: if payment was due on 1 February, notice is due by 1 March.
• A claim not filed within three years of the loss loses its validity (Korean Commercial Act Art. 662).
• Once K-SURE pays, the receivable is assigned to K-SURE, which pursues the importer; the exporter has to cooperate with that recovery.
• If a claim is rejected, you can lodge an objection within one month of the decision.

When does an insured exporter still get nothing?

You will not be paid if the loss falls under a policy exclusion or if you break your duties to notify and cooperate. The most common case is a missed export notification: without it, no insurance relationship exists for that shipment. Legitimate buyer claims caused by the seller, such as defective goods or late shipment, are not covered either.

Key exclusions listed by K-SURE include:

• Losses on deals between a head office and its own branch or subsidiary
• Continued exports: further shipments to a buyer who, within the year before cover started, was already 30 days or more late on a payment
• Legitimate buyer claims for defects, late shipment or other breaches by the seller
• L/C deals where the documents did not comply with the credit
• Receivables lost through the exporter’s own intent or negligence
• Insurance fraud, such as forged documents or collusion with the buyer
• Losses that grew because the exporter neglected to prevent or reduce them, for example by not lodging a claim in the buyer’s bankruptcy or ignoring litigation or arbitration

FAQ

Do SMEs always get 100%?

No. 100% is the base cover ratio for general exports and consignment processing trade; it can be lower under the country underwriting policy, and exempt losses are deducted first. Check the ratio on your policy.

Are letter of credit deals covered?

Yes. For L/C deals the insurance covers losses when the issuing bank does not pay, and K-SURE checks whether it can accept that bank before cover is set. Rejections caused by documents not matching the credit are excluded. See Letter of Credit vs T/T for how the two payment methods differ.

Can it be used for T/T or D/A deals?

Yes. For payment terms of two years or less it covers the importer’s credit risk on open-account deals too, which is where it matters most because no bank has promised to pay. For collection-based terms, see D/P vs D/A payment terms.

How long does it take to get paid?

According to K-SURE, if you claim once a month has passed since your loss notice, payment is usually made within two months of the claim. Late documents or a lengthy buyer–seller dispute can make it take longer.

How much is the premium?

The premium is the insured amount multiplied by a premium rate that depends on the importer’s credit grade, the payment term and other factors. There is no single published rate, so ask K-SURE (via K-SURE ON or its customer centre) for each deal. When budgeting the whole export, see also How much does SME exporting really cost?

Sources

• K-SURE, Short-term Export Credit Insurance (General)
• K-SURE, 단기수출보험(선적후) overview (Korean)
• K-SURE, short-term products comparison (Korean)
• K-SURE, application procedure (Korean)
• K-SURE, overseas claims: loss notice and claim timing (Korean)
• K-SURE, claims guide and exclusions (Korean)
• K-SURE FAQ: export notification deadlines and premium payment (Korean)
• K-SURE FAQ: procedure and shipments before the limit is set (Korean)
• K-SURE FAQ: missed export notification and assignment of receivables (Korean)
• K-SURE FAQ: payment timing and objections (Korean)