Political risk insurance for investors 
 

 Political risk insurance for investors 

When you embark on an overseas investment or project, you accept that it will involve commercial risk. However, your investment 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 an investment or project, you may wish to consider taking out political risk insurance (PRI) with EFIC to help protect against financial losses caused by political events.

EFIC’s PRI Investor policy is available for investments in new overseas companies and projects, new capital injections to existing investments and projects, and expansions of existing investments. It provides cover against losses due to political events specified in the policy, which may include:

  • expropriation – for example, nationalisation or confiscation of your investment or project by the government of the host country
  • war damage
  • political violence
  • inability to convert local currency or transfer currency out of the host country
  • deprivation – for example, the host government cancelling an approval to export from the host country the output of the investment or project, permanently preventing it from operating
  • forced abandonment – abandonment of your investment or project on the advice of the Australian government.

In certain circumstances, cover can also be provided for other political events, such as selective discrimination or default of an arbitral award by the host government following a breach of contract.

The PRI Investor policy covers loss of:

  • investment in the form of direct equity in or shareholder loans to an overseas company, or guarantees given on third party loans made to the overseas company
  • return on investment, such as dividends and retained earnings from an investment in the overseas company.

What are the benefits?

  • Helps protect your overseas investment or project from financial loss caused by specified political events.
  • Can give you greater confidence to undertake a major overseas investment or project in an emerging or developing market.

How does political risk insurance work?

Product diagram for political risk insurance investors

Notes:

  1. You invest in an overseas company or project.
  2. EFIC provides political risk insurance to help protect you from losses on your overseas investment due to 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 an overseas company or project.

Before undertaking the investment, you must have given EFIC written notice of your intention to enter into a PRI contract with EFIC. 

Level of cover

EFIC can indemnify you for up to 90% of the loss insured.

Term

A policy can have an extended term, reflecting the nature of the investment. The maximum term is 10 years.

Fees & charges

EFIC’s premium depends on factors including the location and type of the investment or project, the term of the policy and the risks insured.

 

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.