I. Introduction

Insurance products of the Swiss Export Risk Insurance SERV («SERV»), the Export Credit Agency («ECA») of Switzerland, have become increasingly popular as a component of large project finance transactions. In Decem- ber 2018, the significant increase of the coverage volume prompted the Swiss Federal Council to increase the coverage ceiling from CHF 14 billion to CHF 16 billion to ensure that SERV could continue to meet the needs of businesses across a wide range of sectors by protecting Swiss exporters from defaults of theirclients and facilitating export financing through the provision of insurance to lenders. Moreover, large scale transactions have become more common. Outside of the exporting industry, still only a relatively narrow circle of bankers, experts and lawyers are familiar with ECA covered transactions, including SERV insured transactions. Furthermore, even though ECAs, including SERV and its predecessor organization Export Risk Guarantee («ERG») in Switzerland, have been in existence around the globe for decades, it appears — based on the number and type of as well as increasing demand for ECA covered transactions — that export businesses have not yet fully utilised their potential benefits.

In a recent large-scale transaction, a SERV insured project financing was combined with capital market financing. To reconcile the differing requirements of the two types of financing, the transaction had to be structured in a complex manner. It remains to be seen whether such an innovative combined capital market financed SERV insured project financing will become a new phenomenon and provide for an alternative way to promote export business in times of increasing regional first considerations.

This abstract revisits some of the basic principles of SERV and its product portfolio, illustrates typical structures and features of ECA covered project financing transactions and, finally, explores the challenges and potential solutions for combined capital market financed SERV insured project financing transactions.

II. Swiss Export Risk Insurance SERV

1. SERV as a Facilitator for the Swiss Export Business

SERV is an important facilitator for the Swiss export business: it issued 934 insurance policies and insurance commitments in 2018 and its overall insurance obligations at the end of 2018 amounted to CHF 11.4 billion. Furthermore, SERV's premium revenues reached CHF 94 million in 2018 (compared to CHF 64 million in 2017).

The insurance commitments of SERV are of vital importance to Swiss exporters. This is particularly true for large scale transactions, as the success of such business depends heavily on its (guaranteed) financing and because Swiss exporters face tough international competitors (being supported by their own local ECA agencies) as they tender for the award of international contracts.

2. From the Export Risk Guarantee (ERG) to the Swiss Export Risk Insurance SERV (SERV)

SERV is the successor organisation of the ERG, a former organisation of the Swiss federal government founded in 1934 with the objective of securing jobs and promoting the export business of Swiss companies. ERG was created by the emergency law «Resolution of 28 March 1934 on the promotion of exports by way of public risk guarantee» authorising the Swiss Federal Council to issue export guarantees as a response to the Great Depression in the 30's and the resulting high unemployment rate in Switzerland. In order to implement the resolution, the Swiss Federal Council issued an ordinance on governmental risk guarantee on 17 April 1934.1

The insurances provided by ERG enabled Swiss exporters to insure those export transactions associated with payment receipt risk due to politically and economically unstable circumstances that were uninsurable in the private insurance sector. ERG operated its business independently and on a self-sustaining basis (eigenwirtschaftlich).

Originally, ERG was only capable of insuring risks relating to private buyers, so called private buyer risks, to a limited extent (as opposed to sovereign risks). However, changes in the prevailing global economic environment in the 20th century and, in particular, the privatisation wave in a number of importing countries led to an increase in the market share of private buyers and associated private buyer risks. This had a significant effect on the effectiveness of ERG as it faced restrictions on its ability to insure such transactions of private buyers. This in return had a negative effect on the competitiveness of Swiss exporters on global markets.

These developments led to the decision of the Swiss Federal Parliament to organise ERG differently: it passed a Federal Act on the Swiss Export Risk Insurance2 (SERVG; «SERV Act») and, on this basis, the Swiss Federal Council issued an implementing ordinance, i.e. the Ordinance on the Swiss Export Risk Insurance3 (SERV-V; «SERV Ordinance») which both entered into force on 1 January 2007. The enactment of the SERV Act was also the «hour of birth» of SERV as an independent public law institution replacing ERG, which was organised as a legally dependent public fund. Due to the robust financial situation of ERG at the time of the conversion, the creation of SERV did not require any seed capital by the Swiss federal government.

Currently, SERV is an institution under public law of the Swiss Confederation (öffentlich-rechtliche Anstalt des Bundes) domiciled in the Canton of Zurich having its legal foundation in the SERV Act and the SERV Ordinance, both as amended as of 1 January 2016. As an institution under public law, it does not have any shareholders or members. SERV is part of the decentralised Swiss federal government and is within the scope of the administrative oversight competence of the Swiss Federal Department of Economic Affairs, Education and Research («EAER»). However, the management of SERV is independent from the Swiss Confederation. SERV is subject to supervision by the Swiss Federal Council and ultimately overseen by the Swiss Federal Parliament, but it is independently organised and maintains its own accounts (art. 3 SERV Act).

SERV's primary objective is the promotion of Swiss exporting industries by offering insurance coverage for losses that are not reasonably insurable in the private insurance sector in Switzerland (art. 5 SERV Act). It does so by providing export risk insurances (see Section II.4. below on offered insurance products), thereby facilitating export financing and protecting jobs in Switzerland. The ultimate aim of SERV insurances is to promote the international competitiveness of the Swiss economy and to strengthen Switzerland's exports. However, as a public institution, it should not compete with the private insurance market (see Section II.4 below).

3. Organisation

On an organisational level, SERV is kept independent from the Swiss Confederation and has its own corporate bodies (i.e. board of directors, management and auditor; art. 22 SERV Act).

The Swiss Federal Council acts as the supervisory body of SERV and appoints the members of the board of directors and the auditor. The members of the board of directors are elected for a term of four years. SERV's corporate bodies are liable for their actions according to the general principles of director's liability pursuant to Swiss corporate law (cf. art. 752-760 Swiss Code of Obligations («CO»); art. 23 para. 1 SERV Act).


1 AS 50, 304.

2 SR 946.10.

3 SR 946.101.

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