Political Risk Insurance

By Pasich, Kirk; Thayer, Sandra Smith | Risk Management, June 2011 | Go to article overview

Political Risk Insurance


Pasich, Kirk, Thayer, Sandra Smith, Risk Management


When regimes fall, major business disruption results. enter political risk insurance. the types and terms of political risk policies can vary, however, often significantly. the following are common elements of coverage that risk managers should consider.

CONTRACT FRUSTRATION INSURANCE

Contract frustration insurance protects an insured's trade or sales contract with a foreign company from an action (or inaction) of the foreign government. The insured risks may include confiscation, nationalization, expropriation or changes in the foreign country's law. The policies typically require that the government's action or inaction result in the termination of the contract, prevent the performance of the contract or result in the foreign company having a valid discharge of its duties under the contract. Contract frustration insurance may also protect against losses from an embargo or license cancellation from war, political violence, insurrection, actions by armed forces, strikes or riots.

CURRENCY INCONVERTIBILITY INSURANCE,F

Currency inconverlibility insurance protects an insured doing business in a foreign country if it cannot convert local currency into U.S. dollars. It typically applies when a foreign government enacts new currency restrictions.

EXPROPRIATION INSURANCE

Expropriation insurance protects an insured's investment or assets in a foreign country from the foreign government's unlawful confiscation, nationalization or expropriation.

POLITICAL VIOLENCE INSURANCE

Political violence insurance protects an insured against property and income losses incurred as a result of politically charged events in the foreign country, including war, civil unrest, revolution, riots and politically motivated terrorism. …

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