Part I Assessment and Pre-Investment Management of Political Risk, 3 Investment Insurance

Abstract

This chapter deals with the modalities of political risk insurance. Purchasing political risk insurance is one of the simplest and most direct steps that an investor can take to reduce exposure to political risk. Political risk insurance is similar in many respects to ordinary business risk insurance. It typically provides coverage against political risk such as currency inconvertibility, expropriation, and political violence. Such insurance is available from a number of sources, including State-sponsored insurance agencies such as United States’ Overseas Private Investment Corporation (OPIC), private insurers such as Lloyds of London, and the World Bank’s Multilateral Investment Guarantee Agency (MIGA). The chapter focuses on the MIGA and OPIC insurance schemes. It also discusses other national insurance programmes and private insurers that offer political risk insurance.