International Trade

Global Risk Rises

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...an interventionist line to deal with particular issues – not least, occasionally, the outright failure of foreign investors to meet their commitments.

Meanwhile, in many countries political violence is an ever present threat.

In these circumstances, it is hardly unexpected that demand for political risk insurance is buoyant, as exporters and investors clamour to secure payment arrangements for major contracts and protect the status of their international projects.

But what may surprise, against the background of the testing world environment, is the readiness of private sector political risk insurers to take on extra business, underwriting more and larger transactions for longer periods of exposure.

‘The political risk market is in a bullish mood at present. Demand for cover is strong and there is plenty of insurance capacity in the market,’ says Charles Berry, chairman of BPL-Global, a leading insurance broker specialising in emerging market risk.

‘Recent developments highlight the levels of risk for businesses trading and investing internationally, particularly in emerging economies. Although oil producing countries are benefiting in financial terms from high oil prices, insurers are concerned about the political stability of many of these states.

‘But, with proven underwriting disciplines and favourable cyclical trends in the insurance market, political risk underwriters are feeling confident and the annual renewal of reinsurance treaties for 2007 has increased the market’s overall capacity. ‘Cover for individual trade deals or investments is, of course, priced on a deal-bydeal basis. But, in broad terms, one can say that premium rates are actually on a gentle downward trend.’

The Zurich group has raised the maximum ceiling for insuring an individual political risk transaction to $100m, explained Dan Riordan, managing director of the Washington DC-based political and trade risk division. Zurich will agree to provide cover for exposures that may last as long as 15 years.... continued on page three >

 

 

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