Political Risk insurance is designed to protect your firm's balance sheet in the event of catastrophic political upheaval.
So you would not be successful in a claim for to losses brought about by looting or theft, for example unless these were manifestly politically motivated.
Key elements of a Political Risk Policy
- Confiscation, expropriation and nationalization.. such as the case in Venezuela in 2015 when Nestle had its factories seized.*
- Political Violence - such as looting and arson of pro Ukraine villagers by pro Russian separatists
- Currency Inconvertibility - such as recent moves by Argentina to impose currency controls isn a bid to stem the flow of funds being repatriated.
- Breach of Contract - Such as when a country's government breaches a contract that is fundamentals to a firm's success
Optional riders on a Political Risk Policy
- License cancellation
- Arbitration Award Default
- Selective Discrimination
- Forced divesture
- Forced abandonment
- Potential Riders that you MAY be able to negotiate
- looting and theft
- land owner disputes
* A survey by the magazine 'Strategic Risk' in 2015 concluded that almost 1/3 of Asia-pacific businesses suffered financial loss due to political risk at some point during the preceding 3 years. And of these, roughly half suffered on account of adverse regulatory or legal changes.