Political Risk

Rising geopolitical tensions, commodity-price volatility, political violence, and separatist movements are exacerbating political risks globally for foreign investors.

As the geopolitical landscape becomes increasingly uncertain, multinational organisations and financial institutions have elevated their awareness of the inherent challenges faced when conducting business in areas of concern. Seemingly tranquil countries and regions can erupt quickly, and the nature of events is increasingly unpredictable. The risk of business interests being concentrated in just one, or a few, regions is an issue among companies that operate in emerging riskareas.

In the realm of political risk, where coverage is often difficult to write, Marsh can assist you in managing issues across multiple markets and regions worldwide. We can help you negotiate a suitable policy to cover the risks you face and safeguard against disputed claims.

Our team of globally-connected experts offers the talent, thought leadership, and geographic coverage to access solutions from multilateral agencies such as multilateral investment guaranty agency (MIGA) and development banks, which can offer cover in particularly difficult jurisdictions.

Our areas of expertise include:

  • Financial institutions:Trade finance, commodity finance, structured & project finance and portfolio risk management
  • Trading houses and corporates: Non-payment by importers and government interruption to foreign direct investment to equity & fixed asset.

Particularly in the political risk & structured insurance for financial institutions, Marsh has arranged portfolio basis risk transfer scheme with a syndication of insurers, which gives the banks total (re)insurance capacity of over USD1 billion.

With a combination of local expertise and a global footprint, we can obtain the capacity you need at terms that meet the unique needs of your organisation.  This enables you to reduce the total cost of risk, while protecting your assets. 

Some of service and insurance product may not be available in Japan. Please contact our office for details.

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

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.