Political Risk Insurance

Interstate conflict, the failure of national governance and outbreaks of nationalism are all part of the geopolitical landscape.

Stability in a country sometimes breaks down after crumbling gradually in full view of the media, but the old order frequently collapses with little warning, leaving investors, lenders and contractors unprepared and out of pocket.

Too often, businesses find they are no longer able to operate in a market they once considered predictable. Their licences or contractual rights are being taken away from them, or their assets are damaged; they discover too late that their financial losses are not covered by standard property ‘all risks’ insurance; nor does their standalone political violence cover respond to all the circumstances that have overtaken them so quickly.

Yet it is possible to prepare for the potential impact of unforeseen political upheaval. Different political risks can be managed and transferred in a way that helps businesses feel confident about operating in diverse markets around the world.

Businesses choose to operate in emerging markets, many of them with nascent democracies, for different reasons. They want to expand into high growth economies, to establish a manufacturing base or to access material resources, for example.

Such countries can be politically risky in their own right, or they might be vulnerable to regional instability. When political violence erupts, it can manifest itself in myriad ways that standalone terrorism insurance does not always respond to, for example when companies are forced to leave a country due to physical danger.

That’s why political risk insurance from Chubb provides broad political violence cover for a world where unrest and conflict doesn’t fit neatly into boxes:

Investing overseas is risky for all sorts of reasons to do with assets and operations. But sometimes cash flow is directly at risk from government action. Internal economic or political problems can cause struggling governments to react by imposing exchange controls.

Not being able to remit funds from an overseas operation back to the home country renders that business unit redundant. If controls persist over a longer period, those funds lose value, potentially harming the insured’s overall profitability.

Political risk insurance responds when restrictions on foreign exchange prevent remittances relating to: