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Foreign Exchange Risk Insurance
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What is Foreign Exchange Risk Insurance?
This scheme is designed to hedge the currency fluctuation risk by removing foreign exchange losses that may occur in the course of obtaining or paying foreign currencies through export or import, and fixing the transaction amount in Korean won in advance.
- Foreign exchange risk insurance helps small- and medium-sized companies with vulnerable conditions for foreign exchange risk management in their trade activities by providing them with system and cost- wise assistance to conveniently hedge foreign exchange risk.
- When subscribing to the insurance, K-SURE hedges the entire amount through a commercial bank, and therefore does not receive any benefits from operating this product.
Comparison of Foreign Exchange Risk Insurance Products (based on export transaction)
| Product | Description |
|---|---|
| Forward | When the exchange rate falls, the loss is indemnified and, when the exchange rate increases, the gains are paid. |
| Bear Put Spread | The obligation to pay gains is exempted and, when the exchange rate falls, compensation is also provided for a certain amount of reduction. |
| Put Option | The obligation to pay gains is exempted and, when the exchange rate falls, compensation is provided for the entire amount of reduction. |
What is Foreign Exchange Hedge?
This is to fix the transaction amount of export, import, or overseas investment to the current exchange rate in order to eliminate the risk caused by exchange rate fluctuations.Purpose of Foreign Exchange Hedge
- To continue performing stable business activities by fixing the future cash flow based on the Korean won regardless of exchange rate fluctuations
- To limit profit and loss from exchange rate fluctuations, and secure profits stably through export and import transactions
- Point of Contact : Business Coordination Department