Nippon Export and Investment Insurance (NEXI)
NEXI (Nippon Export and Investment Insurance) is Japan's official trade and investment insurer and the insurance side of Japan's dual export credit system. Its published purpose is to conduct insurance business covering risks that arise in foreign transactions and that are not covered by commercial insurance. NEXI is a special company wholly owned by the Japanese government, established in its present corporate form on 1 April 2017 under the Trade and Investment Insurance Act.
Trade insurance covers risks arising from trade transactions and overseas investment that marine cargo insurance does not generally cover. NEXI equates that system with export credit insurance or export credit guarantee terminology used internationally. Investment insurance covering investment risks developed later than classical trade transaction insurance.
Mandate and institutional form
Trade and investment insurance was managed by the Ministry of Economy, Trade and Industry until the end of March 2001. Nippon Export and Investment Insurance was established in April 2001, and the 2015 revision of the Trade and Investment Insurance Act provided for transition to a special company wholly owned by the government from April 2017. Capital is fully state owned. NEXI is Japan's member of the Berne Union, the international association of export credit and investment insurance providers.
NEXI functions as Japan's insurance-side export credit agency. It is distinct from the Japan Bank for International Cooperation, which lends, invests and guarantees as a policy based bank. NEXI takes insurance risk on defined political and commercial perils and prices premium. JBIC takes credit risk as lender, guarantor or equity investor.
Risks covered and product role
NEXI covers political risks and commercial risk. Political risks include exchange restrictions, tariff increases, import restrictions, war, revolution, natural disasters and extraordinary events that prevent export, collection of proceeds or recovery of prepaid amounts, or that lead to confiscation of investment related holdings. Commercial risks include buyer or borrower insolvency or non payment and related inability to perform the trade contract. The institutional distinction is that political risks are not attributed to the counterparty's fault, while commercial risks are.
NEXI states that trade insurance provides a sense of security by indemnifying insured losses so that companies can continue business after an insured event. It also describes trade insurance as a means of granting credit: when collection risks on export proceeds or import prepayments are covered, trade finance can be arranged more readily. Taking out trade insurance is, as a rule, required when obtaining finance from JBIC for deferred payment exports of plants, machinery and similar goods.
Export credit insurance under NEXI can support supplier credit structures where the exporter extends payment terms and seeks insurance on the receivable, and buyer credit structures where commercial banks lend to foreign buyers and hold NEXI cover on the loan. A NEXI policy sets insured percentage, insured risks, exclusions, premium, claims notice and recovery cooperation.
Eligibility and underwriting posture
Eligibility turns on the foreign transaction nexus, country underwriting categories published by NEXI, and product specific rules for trade versus investment insurance. Environmental and social consideration guidelines have formed part of NEXI's framework since early in its institutional history. Cover is positioned for risks that commercial insurance does not generally take on the same terms.
On many Japanese export financings, JBIC provides a loan portion for its own account while commercial banks fund a parallel portion insured by NEXI. The lender of record for the insured tranche remains the commercial bank. Intercreditor and insurance assignment clauses connect bank rights to insurance proceeds. Failure to maintain required NEXI cover can be a loan default where the facility requires it.
NEXI and the OECD Arrangement
Japan is a Participant in the OECD Arrangement on Officially Supported Export Credits. Officially supported export credits with a repayment term of two years or more are subject to Arrangement disciplines on repayment terms, minimum premium benchmarks and related transparency. NEXI cover that constitutes official support for those tenors is framed by that Participant system, while short term and specialised products follow NEXI insurance rules and country categories.
A NEXI policy identifies the insured transaction as a receivable, a buyer credit loan or an overseas investment, the political and commercial perils covered, the insured percentage, waiting periods and exclusions, and the relationship between any JBIC or commercial bank funding and the policy. NEXI is therefore Japan's state owned trade and investment insurer within the national dual system of export finance and export insurance.