Political Risks
Political risk insurance solutions address many unique liability issues:
Contract Frustration
Contract Frustration (CF) is known as Public Buyer Default. CF insurance covers cancellation of a fixed contract for both pre-shipment, post-shipment & non-delivery risks. Pre-delivery contract frustration may include but is not limited to political violence and war, embargo, operating license cancellation or failure to honor an arbitration award. Pre-delivery coverage may be extended to cover the fair or unfair call of a performance bond, warranty or down payment bond. Risks are covered in respect of contracts with sovereign entities & government-owned obligors including central governments, ministries and government agencies. Post-shipment risks include non-payment, import & export license cancellation amongst other perils. The insurance cover can be designed to provide cover against non-delivery of contracted goods by government-owned suppliers, followed by a failure to return/repay the insured’s advance payment.
Currency inconvertibility and non-transfer risks
Are risks covered in trade transactions and can be underwritten on a stand-alone basis.
Inconvertibility of currency insurance provides cover for the financial loss incurred by the insured when it cannot convert local currency or repatriate funds out of a territory.
The risk location is the territory in which the insured is resident or its business establishment is situated.
If the contract covers more than one business establishment, situated in different territories, each business establishment will create a separate risk location.
Political Violence Insurance Provides cover for physical damage to property as a result of political risks and any consequential financial loss.
Forced Abandonment Similarly, where there is a deterioration of the overseas country’s security situation, it can lead to the Government of the investor proposing abandonment of the investment or mobile assets.
Import and Export Embargo This is a situation where goods, which have already been paid for, are lost following action by the government. This can cause financial losses for the importer and/or the exporter. It is effectively a trading risk to which importers and exporters may be exposed.
Confiscation, Expropriation, Nationalization and Deprivation (CEND)
Policies are designed to protect corporations and financial institutions that maintain an ownership or security interest in property abroad. Currency inconvertibility and transfer risks can also be added to CEND policies to protect against the political risks associated with inter-company loan payments and/or dividend repatriation. If the property is situated in more than one territory there may be multiple risk locations.
Fixed property The risk location for immovable property is determined by the territory in which the property is situated. If the property is situated in more than one territory, then there may be multiple risk locations.
Moveable property In most territories, the risk location is where the moveable property is normally situated.
If the contract covers moveable property situated in more than one territory there may be multiple risk locations.
Where the moveable property’s location is uncertain or variable, the risk location is the territory in which the insured’s residence or business establishment is located.
Kidnap & Ransom
This is a form of insurance which provides cover against kidnap, hijack and bodily injury. It may be taken out by individuals, to provide personal protection for themselves or family members or by corporate entities to protect employees. The risk location is usually the territory in which the person or corporate entity taking out the insurance is resident or its business establishment is located.
Employees of multinational organizations, contractors, companies with employees who travel internationally and high-net-worth individuals and families are particularly vulnerable to hostile incidents. For those operating in remote areas of territories that are suffering political instability and socio-economic hardships, their workforce is often a target for organised criminal gangs, opportunistic kidnappers/extortionists and terrorist groups.
The trauma these incidents inflict on victims and their families is extreme. Such incidents can also have devastating consequences on businesses, affecting staff morale and a company’s assets and reputation. The impact on a company’s finances can be vast as projects may be delayed or terminated groups.
Gordon & Associates offers a comprehensive range of services to respond to threats against your people, brand reputation and properties, which limit legal liabilities. At its core is a critical service – the ability to negotiate a safe and successful outcome to a kidnapping, wherever it may occur and whoever may be responsible. Gordon & Associates has access to crisis management teams, which act to assist and negotiate a positive outcome.
Let Gordon & Associates’ political expertise assist in protecting your business