Financial and Political Risk

Businesses face heightened financial and political risks as they develop their presence in overseas and emerging markets. Aspen has the capacity and specialist expertise to help companies manage and mitigate these risks in areas ranging from project and trade cover to insurance against kidnap, expropriation and politically motivated violence. The benefits of effective Financial & Political Risk Insurance include developing a more secure and stable environment for investments into emerging markets, thereby enhancing potential access to finance.

Our business includes:

Project and Trade

Banks, exporters, importers and traders face potential losses arising out of contractual performance risks, ranging from non-delivery or pre-export finance for  exports to non-payment or insolvency.

The nature of the business we cover and the related risks vary. Some of these interests are trade related - the sale or purchase of physical goods; some may combine elements of physical goods and services; some may be acquisition or project finance and others might be lending arrangements to companies for capital expenditure purposes, backed by additional guarantees, a pledge of assets, hard currency export receivables or other, similarly secured credit risks. Aspen prefers to provide default cover for a range of secured, primary structures, ideally trade related, though we will consider unsecured credit risk. We also prefer contracts that are self-amortising, either helping to develop an emerging market country's foreign exchange reserves or saving foreign exchange through capital investments which, in turn, will lead to greater competitiveness in the world markets and, ultimately, sustainable economic growth.

Political Risk

Banks and multinational enterprises face a wide range of risks when conducting business overseas. Some of these risks can be addressed or mitigated by exercising due diligence and by analysing the economic viability of the proposed business. However, other risks are difficult for investors or lenders to predict. These include some commercial risks and non-commercial - or political - risks. Political Risk Insurance (PRI) enables businesses to mitigate and manage risks arising from the adverse actions - or inactions - of governments.

Confiscation, Expropriation, Nationalisation and Deprivation ('CEND')

CEND provides protection against total or partial loss of investments resulting from host government actions. This includes expropriation, forced sale, deprivation of ownership rights or other acts having similar effect. Buyers are typically extractive industries and banks providing project finance, but also include manufacturers with overseas subsidiaries.

Currency Inconvertibility/Non-transfer ('CI')

CI provides protection against the inability to convert dividends, profits, fees, investment and loans from local currency to hard currency and its subsequent transfer out of the host country.

Political Violence

Political Violence insurance compensates policyholders for damage to or loss of tangible property, and lenders for default in debt service resulting from physical damage losses caused by politically motivated events of war, civil war, revolution, insurrection, sabotage, terrorism and civil strife. Aspen insures against both types of losses. Coverage is usually available for up to one year or, in the case of combined political risk and political violence, up to five years.

Political violence coverage provides compensation when politically-motivated violence damages physical assets or interrupts operations and, as a consequence, is usually calculated on a loss of income compensation for business interruption. For loans, compensation is based on the amount in default as a direct result of political violence.

Kidnap and Ransom ('K&R')

K&R Insurance is designed to protect individuals and corporations operating in high-risk areas worldwide. K&R policies are indemnity policies - they reimburse a loss incurred by the insured. These policies typically insure against:

• Kidnap, hijack and resultant bodily injury
• Threats to kill, injure or abduct or to damage property or products
• Extortion - including threats to kill, injure or abduct or to damage property or products
• Malicious and illegal detention

In addition to insurance protection, we offer advice and assistance to protect the well-being of our clients. In providing this protection and response service we have an exclusive arrangement with AKE Group (www.akegroup.com). The AKE Group are the leading independent security consultants in this field. Their primary role is to help clients achieve the quickest and safest possible release of the victim. They also offer risk management and post-loss consultancy, as well as pre-risk training of staff in loss prevention. In certain cases, we may insist on this being undertaken before we provide cover, and we normally require AKE to vet the risk mitigation systems in place.

Our policies are, however, highly bespoke and can be significantly broadened to suit individual needs and circumstances.

Line size

Aspen writes lines of up to US$70m and periods of up to seven years together with nine months odd time which assists with arrangement periods for some of the longer term business. For Political Violence and Kidnap & Ransom a maximum line size of US$25m is available.

For more information about financial and political risk download this descriptive flyer.

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