Since the mid-1990s, when European credit insurers launched an invasion of the American market, U.S. exporters have enjoyed an abundance of resources to cover the risks on the payment terms they offer to overseas customers.

But, the enlarged insurance marketplace has meant more than added capacity, it has also brought a choice in the contrasting styles of credit management that European and American export credit insurers have developed.

The three European transplants-Euler ACI in Baltimore, COFACE in Monmouth Junction, New Jersey, and Gerling NCM just outside of Baltimore-offer what Joe Ketzner, Euler's executive vice president-commercial, calls "explicit underwriting," in which the insurers qualify the creditworthiness of each buyer, recommend credit limits, and apply risk coverage.

In contrast, the American-based contingent-FCIA Management, American International Group, Chubb, and Trade Underwriters Agency-delivers a style that Ketzner dubs "implicit underwriting." Here, it's the exporter that is underwritten, and the insurers offer cover based on their assessment of the client's know-how and practices in managing the credit process.

Behind these rival of underwriting philosophies is the assumption that American companies are more sophisticated in credit management than Europeans. U.S. exporters are expected to have the know-how, the accounting practices, and procedures to skillfully administer their receivables and control the risk of non-payment.

The traditional U.S. export credit policy, therefore, lets the exporter establish a discretionary credit limit for each foreign buyer. It also includes a deductible that is big enough to encourage the exporter to manage its receivables cautiously or absorb losses.

This "excess of loss" strategy has placed the burden of credit administration on the exporter, who has to maintain a staff of knowledgeable credit professionals and gather the required information tools. U.S. insurers want the exporter to assemble and process a typical information package that includes, for each buyer, an audited financial statement, an independent credit report, and ledger experience from the exporter's own records. Plus, a bank reference in many cases.

So, a U.S. style policy insures the exporter's ability to do its job properly. If a claim arises, it has to demonstrate it has maintained the practices it agreed to use. If it can show it has done so, it gets paid. Otherwise, it's out of luck. And exporters and insurers sometimes don't agree.

In the European style, the insurance policy and procedures are dramatically different. The exporter really outsources much of its credit management activity to the insurer, which gathers the information, accepts credit limits, and applies coverage to the risk. The treatment of individual buyers is often negotiated, but when a claim arises, the burden is on the insurer, which has made the credit judgment.

The European insurers, in turn, maintain huge global databases on the buyers whose payment performance they are underwriting. And in recent years, they have combined this information resource with the lightning speed calculations of computers to produce a highly automated underwriting process. Many decisions are now made in a matter of seconds.

Nothing ever stays the same, of course, and competitors in the export credit insurance business are beginning to reshape their strategies. There is even some convergence of product and marketing networks. Here are a few of the ways the new road map is taking shape.

First, U.S. insurers now do more business with "key buyer" policies, which cover the risks on a select number of overseas customers. This contrasts with the traditional "whole turnover" approach, in which insurance has covered all or a large part of an exporter's receivables portfolio.

"The key buyer policy has become a growth part of the business, larger than in the past," says John Hanson, CEO of FCIA Management in New York. More of the larger, sophisticated exporters are moving to this kind of policy, and many middle-sized companies are also moving away from the whole turnover approach, he reports.

Peter Aitken, a top manager at Chubb & Son's export credit insurance program in Warren, New Jersey, sees the same realignment and growth in the "single debtor" policies. "We look at all top customers above a certain dollar value, it could be two customers or twenty."

In this strategy, the U.S. insurers underwrite the creditworthiness, credit ceilings, and policy cover on the buyers in the package, similar to the European model. There is no discretionary authority involved, and no deductible. "The exporters like it, they get more use of their premium dollars," Aitken remarked.

Second, one U.S. insurer has adopted the automated strategy. American International Group (AIG) has begun to offer a program built on the Internet. Working with Dun & Bradstreet and other databases, it delivers its www.aigtradecredit_.com, which focuses on smaller exporters and smaller transactions.

Third, the U.S. style cover is being helped by information technology enhancements. In Atlanta, Lex-Tek International, a software and systems specialty group, focuses exclusively on supporting export credit insurance. Its automated service helps exporters, insurers, brokers, and banks that rely on insurance for the receivables they finance.

Lex-Tek founder Dick Boger, an ex-broker, stresses that the automated updating of information eliminates the main reasons that insurance claims are denied, and cuts costs in labor-intensive credit management.

Automation in credit reporting has also helped keep information current and easily accessible. Ironically, some of these services are provided by European insurers, but used by exporters working with U.S. insurers. And COFACE has come up with its @rating service, which makes available a credit rating on the companies in its global data bank.

Fourth, U.S. exporters, in a long-term trend, are moving to outsource credit functions. "Cutting credit management staffs is growing-one of our clients cut from twenty to three people," said Jack Johnstone, a partner in International Risk Consultants, a specialty broker in Columbus, Ohio. That encourages growing use of the European model.

Finally, marketing strategies are converging. The European transplants have traditionally relied on in-house staffs, usually organized into regional units and networks of captive agents. U.S. insurers have relied instead on the nationwide network of specialty brokers, about thirty in number, and the big "alphabet houses" that work with the larger corporations.

That is changing rapidly. Specialty brokers now work with both the transplants and the U.S.-based groups. Andrew Garrigue of Garrigue Trade Credit in Richmond, Virginia, notes that, "both have advantages, suited to different kinds of companies."

Exporters with strong credit departments typically have less need for outsourcing. But it may also depend on the number of overseas customers. If these number fifty, an exporter might manage the process comfortably, but if it is 500 buyers, then outsourcing is appealing. Brokers are now arranging cover that is suitable.

In Gainesville, Florida, Alex Olcese, president of AllChem Industries, a global chemicals distributor, puts it this way: "We could never underwrite risk in Malaysia, but Euler has an office there, so we piggyback on them."

The transplants, in turn, are reducing their reliance on in-house marketing staffs in favor of pursuing a "dual channels" strategy that includes the specialty broker network.

Sidebar: Don't Forget About Political Risk Insurance

Another type of insurance that has received a heightened focus lately is political risk insurance. According to the Overseas Private Investment Corporation, political risk insurance protects U.S. companies against 1) currency inconvertibility-inability to convert profits, debt service and other returns from local currency into U.S. dollars and transfer those dollars out of the host country; 2) expropriation-loss of an investment due to expropriation, nationalization or confiscation by a foreign government; and 3) political violence-loss of assets or income due to war, revolution, insurrection or politically motivated civil strife, terrorism or sabotage.