Changing political realities, often referred to as ‘Country or Sovereign Risk’ can have an adverse effect, in both social and economic terms, on the outcomes of international trade or investment projects. Whilst often not directly controllable, in many instances these risks can be managed and or transferred via Political Risk Insurance.
The complexity of the political situation in the host nation must be taken into account by all stakeholders in a project or investment. The types of risks which may be of concern include:
- loss of the economic benefit of a venture or specific asset without fair compensation
- the introduction of laws, regulations or other restrictions by the host nation which impair the operations of the investment or venture
- having to abandon the investment or venture for an extended period due to an evacuation requirement or advice from the home government
- being unable to repatriate funds from the host nation, generally as a result of either insufficient foreign currency reserves of the host nation or having restrictions imposed by the host nation
- physical damage to assets, or loss of ability to operate or use the assets, due to political violence or terrorism
- frustration of a contract either before or after the shipment or delivery of goods when the buyer or seller is a government
Many of these risks can be insured against by using a Political Risk Insurance policy. Marsh’s Political Risk specialists work with companies to evaluate the risks associated with their global business operations and to design and implement tailored political risk management solutions to suit their specific needs.
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