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Political Risk

In an era of increasing geopolitical tensions, competition for resources, and intense political polarization, it is critical for foreign investors to be cognizant of — and better prepared for — political risk.
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Geopolitical risks have increased in complexity in recent years, challenging efforts to maintain project and business resilience. However, opportunities for growth remain plentiful across the globe. Multinational organizations and investors are increasingly making use of available data to understand risk trends, better protect their assets from political risk exposure, and secure capital and project returns.

Insurable political risks

Political risk insurance acts as a safety net against policy decisions or actions by a government or political forces, and the consequences of such actions, allowing companies and lenders to make business and investment decisions with increased confidence. It can cover risks such as the following:

  • Political violence, such as war, coup d’état, insurrection, revolution, sabotage, strikes and riots, and terrorism, that cause physical damage to, or abandonment of, assets or operations and the related loss of business income.
  • Expropriation by governments of assets or operations, including prevention of repossession of assets by creditors.
  • Restrictions on the conversion of local funds to hard currency, or the transfer of funds offshore, as part of remitting dividends, debt service, or other cash flows generated in-country to an insured.
  • Arbitration award default related to breach of contract by a government entity.
  • Credit risks, such as sovereign non-payment.

Marsh’s global political risk team provides specialist advice and solutions to companies and lenders looking to improve the return on their investments, protect their assets, and unlock opportunities for growth.

By working with us, you can be better prepared to manage and recover from government actions or events that might affect your global assets and investments. Get in touch with our specialists to understand whether political risk insurance can help your business mitigate and manage your risks.

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US$350

billion in coverage placed globally for political risk and structured credit clients

billion in coverage placed globally for political risk and structured credit clients

150+

A dedicated team with over 150 colleagues in 28 countries

FAQs

Political risk is the probability of disruption to the operations of multinational enterprises caused by political events occurring in-country or by changes in the international environment. Your organization may face political risk in a country where you have operations, assets, contracts, or investments.

A political risk insurance (PRI) policy serves to indemnify institutional investors, businesses, or financial institutions from government actions that lead to significant monetary losses. It is typically purchased in relation to project finance, asset finance, trade finance, fixed and mobile assets, and foreign direct investment, particularly in the oil and gas, mining, and infrastructure sectors. Depending on the risk, PRI coverage could involve public agency providers, private insurers, or a combination of both.

PRI coverage acts as a safety net against policy decisions or actions by a government or political forces. It can cover risks such as:

  • Political violence, which typically includes civil war, coup d’état, insurrection, revolution, sabotage, strikes and riots, terrorism, and war that cause physical damage to, or abandonment of, assets or operations and the related loss of business income.
  • Expropriation by the government of assets or operations, including a prevention of repossession of assets by a creditor.
  • Restrictions on the conversion of local funds to hard currency, or the transfer of funds offshore, as part of remitting dividends, debt service, or other cash flows generated in-country to an insured.
  • Arbitration award default related to breach of contract by a government entity.
  • Credit risks, such as sovereign non-payment.

Any corporation (including commodity traders), bank, non-bank financial institution, or public agency with international assets or investments should consider political risk insurance.

Political risk insurance enables you to mitigate your risk, and provides comfort for contracts, investments, projects, operations, assets, equipment, and stocks of commodities in higher growth but volatile markets. It can facilitate debt financing, the making of equity investments, and the backing of foreign projects or investments in higher risk countries.