the 10 most common misconceptions about political risk insurance
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The 10 Most Common Misconceptions about
Political Risk Insurance
The GPRA Group
Rod MorrisInsurance Advisory Services
About us
Political and Trade Risk Analysis
Insurance Advisory Services
Micro Political Risk Data Modeling
In-Country Support
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
Rod Morris
Foreign direct investment risks
Economic
Social
Operational
Tax
Regulatory
Legal
Currency
Security
Not to mention…
Political Risk
Breach of Contract
Expropriation
Regulatory Change
National-ization
Currency TransferConfiscation
War/Terror/Civil StrifeProtectionism
Macro and micro risks
7
Political risks of most concern to investors over the next 12 months (MIGA)
MIGA Data
0%
10%
20%
30%
40%
50%
60%
70%
Regulatory ChangeBreach of ContractT&CCivil DisturbanceExpropriationTerrorism/War
Foreign investor losses over the past 3 years
MIGA Data
0%
5%
10%
15%
20%
25%
30%
35%
40%
Breach of ContractRegulatory ChangeT&CCivil DisturbanceExpropriationWar/Terror
Common Approaches to Dealing With Political Risk
USEFUL BUT…INSUFFICIENT
Create joint venture or alliance with local company
Subscribe to sovereign risk reports
Establish relationships with government leaders
Typical PRI Coverage
Breach of Contract, Agreement or Concession
Nationalization Confiscation Expropriation of Property
Currency Inconvertibility
Currency Inconvertibility
Wrongful Calling of a Performance Bond
Denial of Justice
Forced Divestiture
WarTerrorism Civil Strife
Insurable investments
Equity
Consigned equipment
Technical assistance
Bank loans
Capital markets
Oil & gas natural resources
Contractors and exporters
PRI Misconceptions
Loss From Regulatory ChangeLoss From Regulatory Change
Terrorism Defined
Fair Coverage
Property & CasualtyVs.Political Risk
Holes In Coverage
Equity Protection
Government Assistance
Bad Debt
Expropriation claim vs.Investment recovery
Physical Taking of Property
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
Questions
Contact information
The GPRA Group
www.gpra-group.com
646 373 6277