Political risk insurance for contractors 
 

 Political risk insurance for contractors 

When you participate in an overseas project as a contractor or investor, you accept that it will involve commercial risk. However, the project in which your plant and equipment is used may be located in a country with an unstable political environment. Because of the unique nature of political risks and their potential for significant impact on your assets, you may consider taking out political risk insurance (PRI) with Efic.

Efic’s PRI Plant and Equipment policy can protect you against financial loss due to loss of use or possession, damage to or destruction of your plant and equipment caused by political events specified in the insurance policy. The political events may include:

  • expropriation –  for example, confiscation of your plant and equipment by the government of the host country
  • war damage
  • political violence
  • deprivation – for example, refusal by the host government to issue a licence to export your plant and equipment from the host country (if that licence could have been obtained at the start of the policy)  
  • forced abandonment – abandonment of your plant and equipment on the advice of the Australian government.

PRI is available for plant and equipment that you own. It can also cover leased plant and equipment, depending on the type of lease arrangement.

What are the benefits?

  • Helps protect you from financial loss if specified political events affect your plant and equipment located overseas.
  • Can give you greater confidence to participate as a contractor or investor in an overseas project located in an emerging or developing market.

How does political risk insurance work?

Product diagram for political risk insurance contractors

Notes:

  1. You invest in or deploy plant and equipment for a project located overseas.
  2. Efic provides political risk insurance to help protect you from financial loss due to loss of use or possession, damage to or destruction of your plant and equipment caused by specified political events.

Terms and conditions

Terms and conditions will be negotiated during the application process. The following guidelines provide an indication of typical requirements:

Eligibility

You should be a company carrying on business in Australia (or its subsidiary) that is investing in or deploying plant and equipment for use in an overseas project.

Level of cover

Up to 90% of the loss insured, or up to 100% if you (the insured) assume a first loss amount.

Term

The policy term can match the contract term, the term of deployment of the plant and equipment or, for leased assets, the term of the lease.  The maximum term is 10 years.

Fees & charges

Efic’s premium depends on factors such as the location and type of the investment or project, period of insurance and type of cover.

 

NOTE: Information on terms and conditions is supplied as a guideline only.  Efic’s compliance with legislation and OECD guidelines, together with its risk assessment and other policies, influence the actual terms and conditions that may be applicable to any eventual transaction with Efic.