Understanding Political Risk Coverage

Risk Management

PUBLISHED ON: June 5, 2014

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The economic crises and political upheavals occurring around the globe the past few years have highlighted the risk of engaging in international trade and investment. In just the last five years, entire industries and business entities have been nationalized in Argentina, Bolivia, Greece, Ireland, Pakistan and Venezuela, among others. Foreign bank deposits were effectively seized and heavily devalued during the Cypriot bank crisis of 2012-2013. Currency controls are currently in effect in dozens of countries around the world, and are subject to change seemingly at a whim.

These events have created a heightened interest in political risk insurance. Whether you already have a policy, are facing renewal or are considering purchasing a policy for the first time, a careful review of policy terms will be worthwhile. Political risk policies vary greatly from company to company, including those sold by the Overseas Private Investment Corporation (OPIC), a self-financing government-created entity. Beyond the differences among different providers, most policies are specifically tailored from an assortment of possible coverage options, and it is critical to be certain that your company has selected the best and necessary options that it needs for its operations.