Political Risk Insurance

Overview

Any company that does business in a developing country is exposed to political risks that can result in significant losses. This is true whether the firm opens a sales office, owns a warehouse, runs a factory, conducts exploration work, operates a mine, or performs some other activity. Investors also face risks associated with emerging market debt, equity instruments, and lending. Reducing the exposure to political risks is an important aspect of any such operation.

Political risk insurance provides protection against losses that result from currency restrictions, expropriation, and political violence. The purpose of this course is to introduce insurance producers to political risk insurance so they, in turn, can discuss this subject with their clients.

Learning Objectives

Upon completion of this course, students should be able to: 

  • recognize political risks and characteristics of the global economy that contribute to political risks
  • distinguish among various categories of political risk
  • recognize the basic characteristics of the major types of political risks
  • identify noninsurance risk management techniques that can be used to mitigate political risks
  • recognize the key characteristics of various types of trade insurance and investment coverages
  • identify some of the major public organizations and private insurance companies that provide political risk insurance
  • recognize distinctions in motivation and practice between public and private sector political risk insurance providers
  • distinguish among the roles of brokers and underwriters in the political risk insurance market
  • recognize why a captive insurer might, in some cases, serve as a viable alternative to commercial insurance for handling political risks

Designed For

P&C producers; CPAs or risk managers

Prerequisites

A basic understanding of insurance
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