| The present study conducts positive analyses on various aspects of export credit insurance. It is shown that export credit insurance is a useful device to protect domestic exporting firms against various political risks and default risk in the foreign market. Under a certain type of the reimbursement method, export credit insurance can make the exporting firm's production decision independent of the risk and the attitude toward risk.; The government insurance agency can increase the level of exports by setting a lower premium rate. This export promotion effect through export credit insurance is larger when the exporting firm is more risk averse. If the premium rate per coverage is set at a fair rate, a risk averse firm will export as much as a risk neutral firm does in the absence of insurance.; The presence of a domestic market restricts the effectiveness of export credit insurance. If the domestic price is higher than a net foreign price (the foreign price which is discounted by a premium rate), the firm does not export at all even though the insurance is available at a fair rate.; The exporting firms will purchase full coverage of export credit insurance if the premium rate is set at a fair or a more than fair rate. When they do purchase full coverage, they do not spend any money on the self-protecting activities which reduce the export credit risk. Therefore, there exists a problem of moral hazard. |
