Political Risk Insurance is a type of insurance offered to businesses of any size, against political risk. This is 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 political violence; civil unrest, terrorism, war; insurrection; frustration or repudiation of contracts and the inability to repatriate funds.
The growing appetite for many businesses to export their new and existing products far afield and for others to expand their bases around the world, has fuelled the demand for Political Risk Insurance.
It is in developing markets where Political Risk Insurance is so important for aiding and abetting exports of all sizes. Although these markets offer an incredible opportunity for business growth, they also present much greater risks than developed markets. With political turbulence assets can plummet in value, be destroyed or be confiscated and lose value altogether.
Without Political Risk Insurance, businesses would be reluctant and in most cases unable to operate in developing countries with above average levels of political instability. The threat to their assets and their inability to operate smoothly would be too big a risk to take.
With Political Risk Insurance, a policy can be locked in for up to 15 years. This makes it attractive if you’re looking to export to a country where in all likelihood it will take years to gain a real foothold of the market and achieve the growth you are aiming for. Knowing your organisation is insured against political risks for years regardless of what happens enables you to trade with confidence, and with activities that would otherwise be deemed too risky to pursue. You can plan and budget with some degree of certainty that should the worst happen, you will not suffer financial loss that could destabilize your business.
Most Political Risk Insurance is provided by private insurance companies but with the wide range of options available; the differing levels of coverage offered and the equally wide array of policy clauses, choosing a specialised Broker to guide you to the right policy is highly recommended.
What does Political Risk Insurance cover? It can protect
For example if a new government came into power and changed import regulations in a way that meant your shipment of products could no longer enter the country, Political Risk Insurance could cover your loss.
The most important thing to remember about Political Risk Insurance is that if you are looking to export to an emerging market it will cover many of the risks associated with this – provided you have the right policy in place to protect your assets.
If you have questions about Political Risk Insurance please get in touch.
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