TORONTO, April 9 /CNW Telbec/ - Export Development Canada (EDC) today
announced that it expects to facilitate up to CAD 1 billion in domestic surety
credit in 2009 through an agreement with Canada's surety industry.
The agreement was undertaken after changes to EDC's legislation as a
result of the Government's Budget 2009, in which EDC received a temporary
two-year broadening of its mandate to undertake domestic financing and
insurance. EDC's domestic powers were enacted into law on Thursday, March 12,
"By providing re-insurance, EDC will complement the existing services of
Canada's surety industry to increase the amount of business they can provide
to their customers," said Pierre Gignac, Senior Vice-President, Insurance,
EDC. "Since EDC's partnership approach for export-related bonding has been in
place for more than 20 years, our domestic mandate is a natural extension of
our existing relationships."
EDC's will bring additional capacity to Canada's surety companies by
providing re-insurance on new transactions, helping to reduce the amount of
capital required by surety companies to undertake new business. While EDC's
participation will be determined by solely by market demand, EDC's ability to
facilitate up to CAD 1 billion in new domestic surety credit could support up
to CAD 2 billion in contracts for Canadian companies.
Surety helps Canadian companies by providing a guarantee on behalf of
their customers to the owner or buyer that the work in a given contract will
be performed in the manner set out in that contract. Surety is most often used
in the construction and professional services industries in Canada. With EDC's
re-insurance capacity, surety companies will be less likely to use their
working capital to support transactions and can use that capital to undertake
"The additional capacity which EDC is now able to offer the primary
domestic surety underwriting companies by way of reinsurance will be well
received in this challenging marketplace", said Robert Dempsey, President of
GNCA . "The capacity may well be used to meet the bonding requirements of our
clients while maintaining our underwriting standards."
EDC will work through the existing financial services networks that serve
the Canadian surety industry, either directly through surety companies or
indirectly with brokers. EDC will also undertake its support for the surety
industry using current market practices for pricing and documentation.
EDC's approach to the domestic market will be based upon the same
underwriting structure that supports our bonding business model for exports.
All EDC activity will continue to adhere to the Corporation's existing credit
standards and due diligence processes. Proposed transactions must be
commercially creditworthy and be supported by a viable business model. The
commercial solutions offered will be simple and user-friendly for the surety
industry, and designed to ensure ease of withdrawal once EDC's domestic
EDC's approach to providing domestic bonding solutions will be anchored
by the following guidelines:- EDC will support non-exporters.
- EDC will consider all sectors.
- EDC will only facilitate new and incremental commitments. EDC does not
intend to support existing surety bonds.
- EDC will only consider surety bonds and bank guarantees related to
contract performance (including advance and progress payments,
performance, labour and material, warranty and supplier payment
guarantees).To be eligible, companies must be an existing client of the surety that
is seeking additional capacity from EDC. This measure will ensure that EDC's
presence in the market does not result in companies moving their business from
one partner to another in order to obtain EDC support.
Further to this guideline, EDC will provide up to a maximum of 50 per
cent risk sharing to our surety partners. The Canadian surety company must be
willing to undertake a portion of the customer's risk to qualify for EDC
The manner by which EDC will bring additional capacity to the domestic
market reflects what the Government has asked EDC to do, discussion with and
feedback from Canadian surety companies, and EDC's own operational
EDC has also been working with Canada's private financial institutions
and commercial insurance providers to develop more ways to work together to
increase access to credit for Canadian companies.
EDC is Canada's export credit agency, offering innovative commercial
solutions to help Canadian exporters and investors expand their international
business. EDC's knowledge and partnerships are used by more than 8,300
Canadian companies and their global customers in up to 200 markets worldwide
each year. EDC is financially self-sustaining, is a recognized leader in
financial reporting and economic analysis, and has been recognized as one of
Canada's Top 100 Employers for eight consecutive years.
For further information: Phil Taylor, Export Development Canada, (613)
598-2904, Blackberry: firstname.lastname@example.org