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Political Unrest Essay

Political risk insurance (PRI) is business insurance that reimburses losses caused by social or political disruption in a country. It is also a product that can serve as a loss control or mitigation tool in order to encourage investment in a project. As such a tool, even small companies may be required to insure overseas investment with some form of PRI. Political risk insurance is a type of insurance that can be taken out by businesses, of any size, against political risk—the risk that revolution or other political conditions will result in a loss. Political risk insurance is available for several different types of political risk, including (among others): Political violence, such as revolution, insurrection, civil unrest, terrorism or war;Governmental expropriation or confiscation of assets;Governmental frustration or repudiation of contracts;Wrongful calling of letters of credit or similar on-demand guarantees;Business Interruption; and Inconvertibility of foreign currency or the inability to repatriate funds.

As with any insurance, the precise scope of coverage is governed by the terms of the insurance policy. The underwriting of political risk insurance is a dynamic, growing business. As globalisation increases, there are more corporations doing more business in more places around the world with each passing year. Some of the changes occurring in the business are high growth, new product offerings, and a greater role for private capital. While political risk insurance policies are sometimes manuscripted for specific situations, the major political risk insurers have standard forms for the coverages that they issue. For “complex” or larger investments manuscripted policies are the norm and there may be several insurers providing cover in the form of a syndication, through co-insurance, or perhaps with the participation of a reinsurer on a facultative basis.

Providers of political risk insurance include public agencies and private insurance companies. With there being a wide range of options available, the use of a specialized broker is highly recommended. Again, this is not ordinary business insurance and cannot be purchased from the local agent. PRI is often sold as part of a private-public partnership with the host country encouraging investment by offering some measure of PRI or trade credit protection. So each country is different. The World Bank posts an excellent list of brokers and intermediaries with specific expertise in this area.

Politically Insured

Political risk insurance (PRI) is business insurance that reimburses losses caused by social or political disruption in a country. It is also a product that can serve as a loss control or mitigation tool in order to encourage investment in a project. As such a tool, even small companies may be required to insure overseas investment with some form of PRI. Political risk insurance is a type of insurance that can be taken out by businesses, of any size, against political risk—the risk that revolution or other political conditions will result in a loss. Political risk insurance is available for several different types of political risk, including (among others): Political violence, such as revolution, insurrection, civil unrest, terrorism or war; Governmental expropriation or confiscation of assets; Governmental frustration or repudiation of contracts; Wrongful calling of letters of credit or similar on-demand guarantees;

Business Interruption; and Inconvertibility of foreign currency or the inability to repatriate funds. As with any insurance, the precise scope of coverage is governed by the terms of the insurance policy. The underwriting of political risk insurance is a dynamic, growing business. As globalization increases, there are more corporations doing more business in more places around the world with each passing year. Some of the changes occurring in the business are high growth, new product offerings, and a greater role for private capital. While political risk insurance policies are sometimes manuscripted for specific situations, the major political risk insurers have standard forms for the coverage that they issue.

For “complex” or larger investments manuscript policies are the norm and there may be several insurers providing cover in the form of syndication, through co-insurance, or perhaps with the participation of a reinsurer on a facultative basis. Providers of political risk insurance include public agencies and private insurance companies. With there being a wide range of options available, the use of a specialized broker is highly recommended. Again, this is not ordinary business insurance and cannot be purchased from the local agent. PRI is often sold as part of a private-public partnership with the host country encouraging investment by offering some measure of PRI or trade credit protection. So each country is different. The World Bank posts an excellent list of brokers and intermediaries with specific expertise in this area.


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