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Political Risk |
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KEY POLICY FEATURES.
Protection against financial loss arising from contracts with private or public buyers (Contract Repudiation). Wrongful calling of Guarantees Insurance. Confiscation, Expropriation, Nationalisation Insurance. Protects balance sheet (debtor items and overseas assets). Reduces risks associated with overseas trade. Flexibility. KEY TARGETS. Companies with significant overseas assets (for confiscation). Well established and well run companies with good experience in difficult markets (for Contract Repudiation and Wrongful Calling Insurance) POLICY TYPE: INSOLVENCY ONLY DOMESTIC OR EXPORT. DOMESTIC / EXPORT Covers policyholder against losses due to insolvency of buyer on an excess of loss basis for domestic and export credit risks. Designed for companies with a spread of business throughout North America , Scandinavia and Europe . Based on the insured's ability to manage credit risk and to make its own decisions. Provides a high degree of independence for policyholder and a low level of administration. Looking for companies with insurable sales in excess of £15,000,000. Indemnity: Normally 90% above deductible. Policy limit of liability: up to £15,000,000 subject to maximum limit of £4,400,000 per buyer. POLICY TYPE: INSOLVENCY PLUS PROTRACTED DEFAULT Covers policyholder against losses due to insolvency and Protracted default. Indemnity: 90% above deductible. Policy limit: up to £15,000,000 subject to maximum limit of £4,400,000 per buyer Other features as above. POLICY TYPE: COMPREHENSIVE EXPORT CREDIT INSURANCE (CECI) Export credit insurance designed to cover short-term receivables against commercial and political risk of non-payment. Seeks a spread of export markets with option to select certain geographical areas for coverage. Based on insured's ability to manage credit risk and to make it's own decisions. Provides high level of discretion for policyholder. Looking for companies with insurable sales in excess of £15,000,000. Indemnity: 90% Policy level of liability up to £15,000,000 subject to a maximum of £4,400,000 per buyer.
POLITICAL RISK INSURANCE Protection for exporters and investors in foreign countries. Policies written: - Contract Repudiation. Protection for Overseas Investments Wrongful Calling of "On Demand" Guarantees. Political Risk Insurance for Export Transactions. POLICY TYPE: CONTRACT REPUDIATIO, LICENCE CANCELATION CURRENCY INCONVERTABILITY COVER. SALES CONTRACTS (GOVERNMENT BUYER). Protects the insured against financial loss arising from: - Termination of the contract by the buyer in circumstances where they have no right to do so under the terms of the contract. Material default of the buyer in respect of his financial and contractual obligations and responsibilities under the contract. Cancellation or non-renewal of import licences and other necessary permits by the Host Government. Cancellation or non-renewal of export licences and other necessary permits by the insured's Government. War, Civil War, Rebellion, Revolution and Civil Commotion occurring within the buyers country which prevents the insured from fulfilling the terms of the contract. EXAMPLES . Failure of a Government Bank to honour letters of credit. Failure of a Government entity to honour guarantees issued in support of a contract Failure of a Government buyer to pay for goods or services in the currency of the contract. The payment instrument is usually a draft or promissory note. Failure of a Government official to sign certificates which enable the Insured to draw down under externally disbursed aid or project financing. POLICY TYPE: PROTECTION FOR OVERSEAS INVESTMENTS CONFISCATION, NATIONALISATION, EXPROPIATION COVER. Protects the insured against financial loss arising from confiscation, Nationalisation and Expropriation of their investments in the Host Country. Cover responds to an expropriatory act which: - Permanently deprives the Insured of all or part or part of their shareholding in a foreign enterprise. Permanently deprives the foreign enterprise of all or part of its fixed or current assets Selectively prevents the operation of the Foreign Enterprise so as to cause the cessation of it's activities. Such an "expropriatory Act" must be taken or authorised by the Host Government. The host government is defined as any present or succeeding governing authority of all or any definable region of the Host Country regardless of it's method of succession. Such an authority must, however, exercise effective legalisation, executive and judicial control. EXAMPLES. The following investments are often at risk: - Local subsidiary companies of the insured. Local companies in which the insured holds a minority shareholding. Joint ventures in which the insured participates. Mobile construction equipment Transport vehicles. Financial Assets Aircraft. POLICY TYPE: PROTECTION FOR OVERSEAS INVESTMENTS (CONTINUED) MALICIOUS DAMAGE / EXTORTION / MALCIOUS PRODUCT TAMPERING AND KIDKNAPP AND RANSOM Protects the insured against financial loss arising in connection with a foreign enterprise as a result of: - Malicious damage to the insured investment. Such damage is likely to arise from terrorism, violence, sabotage, riots, strikes or civil commotion. The policy recognises that three aspects of the insured's are at risk: - Buildings Contents Loss of Income |
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POLITICAL RISK - INTRODUCTION. Companies trading with third world or developing countries face a variety of political hazards. Often the contractual principal will be a government entity leaving the company exposed to: - • Non Employment ; • Unilateral termination of the contract; • Cancellation of import / export licences; • War or Civil War; • Trade Embargoes. In circumstances where the contractual principle is non-governmental, the company may face exchange transfer difficulties in addition to "political" risks such as war, licence cancellation, etc Such companies are further exposed to: - • Wrongful calling of on demand performance guarantees issued to governmental buyers ; • Wrongful calling of on demand performance guarantees issued to non-governmental buyers as a direct result of government action; • Confiscation of mobile plant and equipment imported for completion of the contract; • Confiscation of nationalisation of permanent investments, such as subsidiary companies. |
