Political Risk Insurance For Trade Finance
Political Risk Insurance for trade finance offers achievable solutions to many of the risk management complications involved in international trade. International trade with emerging markets entices with promises of exceptional margins and high rates of return. Admittedly appealing prospects. The growth of international trade has continued unabated for decades and is now approaching $20 trillion per year. The political class in developed nations worldwide fully support globalization and western democracies are marching inexorably towards globalism.
But, while cross-border trade with developing countries is socially and politically encouraged, it is still unpredictable and fraught with risk beyond what can be controlled by importers, exporters, or trade financiers. Political risk in emerging markets can still give even the most sophisticated importers and trade finance providers pause while excessive political risk can make trade finance unavailable for some transactions.
When visualizing these risks, picture government officials who look like Claude Rains visiting a shipping terminal and confiscating the goods you purchased because he is shocked, shocked I tell you, that some activity or another is going on there. Virtual Finacial LLC can help protect your potentially exceptional margins from excessive risk with Political Risk Insurance for trade finance.
Political Risk Insurance For Trade Key Features
Importing goods from companies located in developing markets can be unpredictable and risky, even for seasoned importers. While trading with vendors in developing markets can be enticing, it also presents a variety of pitfalls that are beyond the control of importers, exporters, or trade finance providers. Consider risks such as:
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War, civil strife, coups and other acts of politically-motivated violence including terrorism
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Expropriation, including abrogation, repudiation and/or impairment of contract and other improper host government interference
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Restrictions on the conversion and transfer of local-currency earnings
Expropriation and Unlawful Government Interference
Protect your high-margin cross-border trade deals with Political Risk Insurance. When combined with trade finance solutions and advisory services political risk insurance can open the door for you to trade in more than 150 developing countries, including high-risk countries
Political risk insurance can position you to take advantage of commercially attractive opportunities while also mitigating political risk, thus making you far more competitive in the global marketplace. Political Risk Insurance offers innovative, comprehensive, cost-effective risk-mitigation products to cover losses to tangible assets, investment value, and earnings that result from political perils.
Political Risk Insurance for trade finance can protect foreign investments against acts of expropriation and other unlawful interference by a sovereign government that dispossesses you of your fundamental rights in a project. Expropriation coverage protects against nationalization, confiscation and creeping expropriations which result in a loss of the total investment. Types of government interference that can devastate a project include:
Expropriation coverage protects against nationalization, confiscation and creeping expropriations which result in a loss of the total investment. Types of government interference that can devastate a project include:
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Abrogation, repudiation, or impairment of contract, including forced renegotiation of terms
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Imposition of confiscatory taxes
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Confiscation of funds or tangible assets
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Outright nationalization of a project
Political Risk Insurance can provide arbitration award default and denial of justice coverage for US debt and equity investors, which protect the insured from non-payment of an arbitration award by a host government. Political Risk Insurance may also provide coverage for losses resulting from government corruption.
Political Violence Coverage
In recent years many places in the world face increasing political uncertainty and violence which can have a crippling effect on international investments. Political violence coverage provides compensation for equity assets, real property and income losses caused by:
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Declared or undeclared war
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Hostile actions by national or international forces
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Revolution, insurrection, and civil strife
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Terrorism and sabotage
Political Risk Insurance for trade with currency inconvertibility coverage insures conversion and transfer of earnings, return of capital, principal and interest and similar costs.
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More restrictive foreign exchange regulations
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Failure to approve of or act on an application for hard currency
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An unlawful effort to block funds for repatriation
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Actions resulting in an inability to convert and transfer local earnings
Election of Coverage
Political Risk Insurance for trade coverage elections for most equity and shareholder debt investments are based on a coverage ceiling and an active amount. The coverage ceiling represents the maximum amount of insurance available for the insured project and future earnings under an insurance contract.
Premiums are calculated based on the active amount, which represents the insurance actually in force, from time to time, during any contract period. The active amount of all coverage must equal the book value of the insured investment at a minimum, unless a lower coverage ceiling is elected. There is no charge for the difference between the coverage ceiling and the active amount.
For investment types other than equity and debt investments, premiums are computed based on the maximum insured amount, the current insured amount and a standby amount. Maximum insured amount represents the maximum insurance available for the insured investment under an insurance contract. Current insured amount represents the insurance actually in force during any contract period. The difference between the two is the standby amount. Separate premiums are charged for the current insured amount and standby amounts. For loans, premiums are charged on the covered amount, the amount of disbursed principal plus accrued interest, less principal paid to date, and a standby fee is charged for un-disbursed principal.
