the 10 most common misconceptions about political risk insurance

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

info@gpra-group.com

646 373 6277