Export credits

Minimum Risk Premium: The Knaepen Package

 

In 1998, new disciplines on minimum risk premium were integrated into the Arrangement. These disciplines, known as the Knaepen Package , came into force on 1 April 1999, following over four years of intensive work by the Participants' Working Group of Experts on Premia and Related Conditions from the time that the Participants agreed a Declaration of Principle and Mandate for the Group's work in September 1994.

The basic premium-related disciplines of the Arrangement are set forth in Articles 20 through 24 in the core provisions for export credits and apply to all business covered by the Arrangement (i.e. medium/long term business with a repayment term of two years and over, exclusive of agricultural products and military sales). The premium-related disciplines do not apply, however, to official export credits for ships covered by Annex I of the Arrangement nor to large aircraft covered by Annex II, Part 1 of the Arrangement.

In effect, the premium disciplines of the Arrangement yield minimum risk premium rates (known as Minimum Premium Benchmarks) which are meant to:

  • Reflect risk, thereby ensuring that risk premium rates are not inadequate to cover long-term operating costs and losses.
  • Converge, so as to eliminate distortions of competition and create a level playing field.

In practice, the actual premium rates charged by the Participants for specific transactions may be above the minimum rates required by the Arrangement. Accordingly, the OECD Secretariat is not in a position to indicate the premium rate charged for any specific transaction; any transaction-specific enquiries should be directed to Participants' export credit agencies .

 

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