The 10 Most Common Misconceptions About Political Risk Insurance

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The 10 Most Common Misconceptions About Political Risk Insurance

  1. 1. The GPRA Group Rod Morris Insurance Advisory Services The 10 Most Common Misconceptions about Political Risk Insurance
  2. 2. About us Political and Trade Risk Analysis Insurance Advisory Services Micro Political Risk Data Modeling In-Country Support
  3. 3. Rod Morris Vice President and Managing Director of Political Risk Insurance for Overseas Private Investment Corp. (OPIC) Chief Regulator for Captive Insurance for the State of Arizona Senior Vice President of CNA International and Risk Management Operations
  4. 4. Foreign direct investment risks Economic  Regulatory Social  Legal Operational  Currency Tax  Security
  5. 5. Not to mention… Political Risk
  6. 6. Macro and micro risks Breach of Expropriation Contract Regulatory National- Change ization Currency Confiscation Transfer War/Terror /Civil Strife Protectionism
  7. 7. Political risks of most concern to investorsover the next 12 months (MIGA)70%60%50% Regulatory Change Breach of Contract40% T&C Civil Disturbance30% Expropriation20% Terrorism/War MIGA Data10%0% 7
  8. 8. Foreign investor losses over the past 3years40%35%30% Breach of Contract25% Regulatory Change T&C20% Civil Disturbance15% Expropriation War/Terror10% MIGA Data5%0%
  9. 9. Common Approaches to Dealing WithPolitical Risk Create joint venture or alliance with local company Subscribe to sovereign risk reports Establish relationships with government leaders USEFUL BUT… INSUFFICIENT
  10. 10. Typical PRI Coverage
  11. 11. Breach of Contract,Agreement orConcession
  12. 12. NationalizationConfiscationExpropriationof Property
  13. 13. Currency Inconvertibility
  14. 14. Currency Inconvertibility Wrongful Calling of a Performance Bond
  15. 15. Denial ofJustice
  16. 16. Forced Divestiture
  17. 17. WarTerrorismCivil Strife
  18. 18. Insurable investments Equity Consigned equipment Technical assistance Bank loans Capital markets Oil & gas natural resources Contractors and exporters
  19. 19. PRI Misconceptions
  20. 20. Loss From Loss From Regulatory ChangeRegulatoryChange
  21. 21. TerrorismDefined
  22. 22. Fair Coverage
  23. 23. Property & CasualtyVs.Political Risk
  24. 24. Holes In Coverage
  25. 25. Equity Protection
  26. 26. GovernmentAssistance
  27. 27. Bad Debt
  28. 28. Expropriation claimvs.Investment recovery
  29. 29. Physical Takingof Property
  30. 30. Recap PRI is insurance, not a guarantee Political risk can be mitigated but PRI is still evolving and misunderstandings are common. Conduct independent political risk analysis Re-evaluate current policies annually Consult a professional, experienced advisor
  31. 31. Questions
  32. 32. Contact information The GPRA Group www.gpra-group.com info@gpra-group.com 646 373 6277

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