political risk insurance: opportunities and pitfalls
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Political Risk Insurance: Opportunities and Pitfalls. LAW OFFICES robert wray PLLC 1150 connecticut avenue, nw ● suite 350 washington, dc 20036 main 202.349.5000 ● fax 202.293.7877. Political Risk Insurance: Basic Coverages. Currency Inconvertibility Expropriation - PowerPoint PPT PresentationTRANSCRIPT
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Political Risk Insurance:
Opportunities and Pitfalls
LAW OFFICES
robert wray PLLC1150 connecticut avenue, nw ● suite 350
washington, dc 20036main 202.349.5000 ● fax 202.293.7877
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Political Risk Insurance:
Basic Coverages• Currency Inconvertibility• Expropriation• Breach of Contract/Disputes• Political Violence
robert wray PLLC
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The Political Risk Insurance Marketplace
• Public sector– Deterrence– Innovation
• Private sector – Absence of public policy constraints– Speed– Commercial opportunism
robert wray PLLC
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Currency Inconvertibility
• Convertibility and transfer of debt service, dividends, etc.
• Active or passive blockage
• Not devaluation coverage – prevailing rate
robert wray PLLC
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Currency Inconvertibility: Pitfalls
• Waiting period
• Rate at which compensation for blocked local currency is calculated
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Expropriation (“CEN”)
• Various wordings, same general intent• Loss of fundamental rights (including
creditor’s rights)• Outright and “creeping” expropriation• Exclusion for bona fide government acts• Exclusion for government commercial
acts
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Expropriation: Pitfalls
• Wording ambiguity• Exclusions• Total vs. partial loss coverage• Pledge of shares
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Breach of Contract/Disputes
• Plugs government commercial obligation exclusion hole
• Specific government obligations
• Failure to honor arbitration award
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Breach of Contract/Disputes:
Pitfalls• No better than the underlying
agreement with the government– What you can recover– The arbitral forum
• Typically no faster recovery than the arbitral forum allows
• Inability to obtain a timely (or any) award
robert wray PLLC
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Political Violence
• Broad spectrum of events: from war to civil commotion, including terrorism
• Causing a loss– For loans: default– For equity: damage or inability to operate
• Book/replacement value compensation for damage• Lost income or investment book value for inability to
operate
robert wray PLLC
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Political Violence: Pitfalls
• Disputed causation
• Damage to what?
• Loss without damage
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Some General Issues
• Waiting periods• Percentage of coverage• Term• Exclusions and limitations• Claims arbitration• Creditworthiness
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Pitfalls and Opportunities
• Choosing the right insurer for the transaction and the buyer (price isn’t everything)
• Negotiating the terms and wording• Breaking new ground• Managing the claims (and incipient
claims) process
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