For companies or financial institutions trading or investing overseas, exposure to political and credit risks is a significant reality of doing business. Preservation of management and capital, along with the protection of shareholder value, have become significant matters. Specialist insurance products can help mitigate these risk exposures, and Sicher Sicher, as a claim-pro insurance broker, is an expert in transactional and associated advisory services in this field.
Political & Credit Risk Insurance
Sicher Sicher globally advises and arranges insurance for some of the world’s leading industrial companies, banks, oil companies, miners, exporters, construction companies, and commodity traders. We arrange protection for their overseas investments and trading activities.
- Coverage of Political and Credit Risk Insurance
- Asset Risk Cover
- Contract risk insurance cover
- What protection can contract risk insurance provide?
Coverage of Political and Credit Risk Insurance
Political and credit risk can be placed into two main categories associated with asset risk and contract risk:
Asset Risk Cover
Sicher Sicher can arrange coverage to protect investments in fixed assets, such as operating companies and joint ventures, as well as mobile assets, such as plant equipment or stocks of products, while overseas. We arrange cover for banks on their loans to overseas borrowers or loans secured on overseas assets, which are also vulnerable to foreign government actions.
The asset risk cover includes the following perils:
- Confiscation, expropriation, and nationalization.
- forced abandonment.
- Forced divestiture (where an investor’s own government requires them to divest an asset in a foreign country).
- Deprivation (restrictions on the export of products or equipment from the foreign country).
- Selective discrimination, including creeping expropriation
- Political violence, including war, terrorism, strikes, riots, and civil commotion,.
- Operating Licence Cancellation.
- Currency in-convertibility or exchange transfer restrictions in respect of dividend remittances or debt service payments from the foreign country.
- Arbitration Award Default.
- Trade disruption and business interruption.
- Non-repossession of assets securing financing extended by the insured.
What is the scope of cover?
Following a loss, insurance can indemnify you for the loss of:
- the book value of your equity, plus your share of any retained earnings and accounts receivable due at the date of loss.
- the outstanding value of any loans made to your foreign enterprise and any enduring obligations with respect to loans you have guaranteed.
- the book value or new replacement value of your mobile assets or stock.
- the hard currency equivalent of money that you are unable to convert or transfer from the foreign country.
- the amount of an arbitration award made in your favour but which is not honored.
- the cost of reinstatement of physical damage caused by political violence perils.
- increased costs and extra expenses.
Contract risk insurance cover
Contract Risk is inherent in all trading or lending activity, but especially so when operating overseas. Insurance cannot make up for a poorly created contract, but putting appropriate insurance around a contract that protects the client against unforeseen defaults or macro-political events.
Sicher Sicher arranges effective and affordable contract risk insurance for principals or lenders against the following exposures:
- Contractual default includes losses caused by non-payment for goods and services or non-delivery of goods or services paid for in advance
- Embargos include UN or EU measures preventing compliance with contractual obligations
- Import/Export License Cancellation
- War and political violence
- Arbitration Default
- Currency In-convertibility/Exchange Transfer
- Non-honoring of the guarantee
- Non-honoring of the letter of credit
- Wrongful calling of on-demand contracts and bid bonds
- Fair calling of on-demand contracts or bid bonds following political force
- Major events, such as the imposition of an embargo or the outbreak of war
- Cover to protect against losses incurred both prior to and following the shipment of goods
What protection can contract risk insurance provide?
Following a loss, contract risk insurance can indemnify for the loss of amounts due under the terms of the client’s contract or loan in respect of defaulted payment or delivery obligations. Amounts due but not paid under any Letter of Credit where documentation has been satisfactorily submitted to the opening bank. Amounts due but not paid to you under any guarantee given in support of the insured contract.
Costs and expenses have been incurred, up to the date of loss, in meeting obligations under the contract prior to the shipment being made; this includes costs in respect of design, raw material manufacture, etc., plus up to 10% of your net profit. The amounts called under any contract or bid bond and for which your bank has demanded compensation under its counter-indemnity.
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