What is political risk insurance?
Political risk insurance is coverage for companies and investors against the risk of financial losses as a result of political events. The policy holder is potentially covered for large financial losses when an action taken by a government entity negatively impacts a business, an investment portfolio, or other financial interests.
Many possible political events could have serious consequences for those with valuable assets. These events include political violence, sovereign debt default, expropriation (government confiscation of property), and acts of terrorism or war. One of the main goals of this type of insurance is to reduce the risk of property holdings and business interests in foreign countries. The benefits of this coverage include allowing corporations to invest in developing countries.
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When do I need to be aware of political risk insurance?
A party that has many holdings in foreign countries, especially those that tend to have unstable governments, should consider obtaining political risk insurance. This insurance type often provides peace of mind for policy holders. It can also offset large losses that occur due to swiftly changing political conditions in many areas of the world. Multinational corporations, international banks, exporters, and developers could benefit from this type on insurance.
What is important to know about political risk insurance?
The increased risks of doing business in certain localities can be reduced through political risk insurance. This insurance product has many favorable features that minimize a company's exposure to political events. There are some other important items you should know about political risk insurance:
- Political risk insurance enables a company to invest in unstable areas of the world.
- It can be locked into place for as long as 15 years.
- It can cover assets in one or in multiple countries.
- It protects against the expropriation of assets as well as the devaluation of currency.
- Political risk insurance meets the needs of companies and banking institutions with foreign assets.