What is political risks insurance?
July 28, 2016
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Nika Melnik Associated partner
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The approach to defining political risks insurance is quite different from other insurance products. It’s worth mentioning that political risks insurance can refer to two different notions. What are those and what do they mean?
First, there is insurance of foreign investments materialized in the shape of assets located in the territory of foreign country. Therefore it’s crucial that investor be confident in their security in terms of being insured against following perils: nationalization, requisition, amendments to legislation, military conflicts, strikes, riots, civil commotions or other accidents which may put investors’ property in danger. This is also relevant for the money transfers in foreign currency. Insurance companies which are residents of Ukraine or operate though the representative offices cannot insure this kind of risk due to the impossibility of the dispute with their country of residence. As to the insurance companies operating outside Ukraine, they can do it but are not willing to take these risks since they are in fact very high given the current political and economic situation in Ukraine.
In the light of recent events in our country political risks insurance has gained new significance. Therefore one should at the very least know about the options available in the market.In the light of recent events in our country political risks insurance has gained new significance. Therefore one should at the very least know about the options available in the market. The best case scenario would be purchasing the insurance policy in order to put the worries about the safety of one’s property aside.
Second, there is a complex insurance of political risks (Political Violence Insurance). That is basically the insurance agreement which covers the Insured against any damage caused by acts of terrorism, sabotage, civil commotions, strikes, rebellions, revolutions, mutinies, coup d’etat or civil war. Such insurance policy can be concluded in Ukraine with the assistance of foreign insurance and reinsurance companies. It’s quite expensive, but totally worth it if there is actual threat that the property could be destroyed by the terrorist attack. For example, the 9/11 terrorist attacks aside to the tragic consequences of taking away hundreds of lives, also brought about $ 4.6 bln. worth of insurance indemnifications .
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