The vast majority of businesses in today’s global market can benefit from opportunities outside of their home territory. Yet few businesses are comfortable with the potential losses that can result from the political risks associated with operating internationally. A foreign government’s action—or inaction—can cost a company both in physical property and in financial assets. Black Fox International, through our international insurance partners, provides Political Risk Insurance, to help its financial institution and corporate clients to mitigate political risks worldwide.
COVERAGE FOR A BROAD RANGE OF OVERSEAS TRANSACTIONS AND POLITICAL PERILS
Our Political Risk Insurance can be tailored to cover an extensive range of overseas business – including new or existing equity investments, loans to public or private sector counterparties, sales to government buyers, and contracts for goods or services. Coverage is designed to help protect insureds against losses that can result from the most critical political perils including:
- Confiscation, expropriation and nationalization
- Currency inconvertibility and non-transfer
- Political violence
- Contract repudiation
- Coverage can be expanded to include other political perils as required.
Many manufacturers have large investments in overseas subsidiaries or joint ventures. Loss of assets and income from these investments due to an unforeseen political event would be catastrophic for such companies.
Exchange control policies add a further dimension to investment-related risks. Repatriating profits or dividends often requires the approval of the host country’s Central Bank. Such approval may not always be automatic if economic priorities change. Accordingly, it is imperative that manufacturers secure political risk insurance to protect loan repayments, dividends and profit distributions against restriction on exchange transfers or currency inconvertibility.
FOR FINANCIAL INSTITUTIONS…
Financial institutions seeking the higher margins of emerging markets assume significant levels of country risk associated with trade finance, project and asset-backed loans, working capital loans and bank inter-branch lending. These structures leave financial institutions exposed to the possibility of default due to acts by the host government, including asset expropriation, currency inconvertibility and transfer restrictions, and damage due to political unrest.
Black Fox International Global Trade & Political Risk works with financial institutions to structure political risk insurance programs which address these risks and may allow them to:
- Increase capacity for international business
- Avoid provisioning requirements
- Offer clients attractive financing terms
- Expand distribution capabilities
Financial institutions may secure Political Risk Insurance for their own loan portfolios or on behalf of other banks to facilitate loan syndication. Policies can be manuscripted with the financial institutions as the named insured, co-insured, or loss payee, as dictated by the transaction structure.
FOR IMPORTERS AND EXPORTERS…
Companies exporting or trading with overseas clients and governments encounter a number of potential risks that they do not experience in their domestic markets. Secured transactions can be disrupted by embargo, license cancellation or government acts which frustrate completion of a contract. In situations where services or goods are provided to a government entity, the political and commercial risks are inseparable.
Even when trading activity proceeds smoothly, complications can arise with payment. Currency inconvertibility, exchange restrictions or war can delay or altogether prevent the recovery of monies due.
Political Risk Insurance provided through Black Fox International enables importers and exporters to take advantage of overseas trade opportunities in regions where political risks may be a concern. Insurance can be structured to cover losses due to political risk events that occur before, during or after goods are shipped. Insurance can be tailored to accommodate import or export contracts covering a broad range of products, including capital goods, spare parts, commodities and services.
Companies competing successfully for the construction and operation of major infrastructure projects overseas—from building dams to operating telecom systems—take on heavy exposure due to the specialized mobile plants and equipment they require on-site. If they are prevented from re-exporting such equipment after a project is completed, considerable losses can result.
Contractors may also be forced to abandon projects due to war or civil unrest. In these cases, they not only have uncollectible receivables, but also may not be able to recover all or some of their overseas equipment.
Our Political Risk Insurance protects construction and engineering companies against losses resulting from foreign political risks, including the wrongful calling of unconditional and irrevocable guarantees.
With Political Risk Insurance provided through Black Fox International, companies and financial institutions can focus on their core business activities and pursue international opportunities knowing they are well protected.