The recent appreciation of the dollar against the real creates unbalance in the markets, and suggests the need for caution in activities involving foreign trade, among them International Import Transport Insurance.   

When contracting International Transport Insurance, the importer has the possibility of choosing the currency in which the policy will be written, i.e., foreign currency or local currency.     

Policy written in foreign currency

If the policy is written in foreign currency, the U.S. dollar will be used as a reference and all the amounts mentioned in the import documents, in whatever currency, will be converted into dollars. In this form of insurance, the insurance cost (premium) is charged in dollars, through a Payment Order, with instructions for conversion into reais, at the exchange rate prevailing on the date of payment (previous day’s Ptax rate). In the event of a loss, the indemnity will be paid with basis on the same currency conversion criterion. Thus, the insured will be protected against eventual exchange fluctuation losses.

Policy written in local currency

If the policy is issued in local currency, all the amounts mentioned in the purchase/sale contract will be converted into reais at the exchange rate prevailing on the date of shipment, which also will be used for premium collection and loss indemnification purposes. In this case, any losses arising from devaluation of the Brazilian currency will be sustained by the importer, however, such situations occur only during dollar bull phases.

During periods of exchange volatility, small currency variations are expected and supported by the importing company. However, if the dollar maintains an upward trend and the Brazilian economy enters a period of uncertainty, companies having policies written in local currency will require to analyze the possibility of moving to foreign currency, bearing in mind that insurance indemnities can be paid months after the losses occur.   

Why not obtain an estimate for your International Cargo Insurance? Use our online calculator, which will provide you with a base value to enable you to make plans.