Investment Risk

In an ever-changing global marketplace, territories can appear stable one day and then unexpectedly be faced with political or economic tension. This instability is unpredictable and we have seen an increase in this in recent years.

Foreign direct investment can be affected by political and credit risks that can impact the investors and lenders associated with the country and region of risk.

These risks include expropriation, currency inconvertibility, political violence, non-payment and ultimately termination of lengthy power purchase agreements following actions or inactions of a foreign government.

Our diverse, global and creative team of specialists works as your agent and problem solver to overcome concerns or challenges, and work out a strategy to leverage your business volumes.

We believe insurance contributes to the growth of your business as well as providing crucial protection in unstable circumstances.

We find opportunities where others see challenges. Our entrepreneurial culture and exclusive analytical ability helps clients to identify and realise opportunity in volatility.

WHAT WE DO

Investment risk

Each risk, for our global clients, has the potential to have a catastrophic impact on the economic viability of the project, and in turn the financial interests of both overseas investors and lenders.

Before investors and/or lenders embark on such projects it is vital for all parties to understand the potential influence of these political and credit risks on any project.

Our proactive team work side by side with our clients in gathering and analysing risk data, which in turn allows us to offer our clients options and recommendations to mitigate the potential losses through the arrangement of bespoke insurance policies.

Investment risk

Our knowledgeable and insightful team has extensive experience working with clients with foreign direct investment and employ a meticulous approach to ensure the best cover is in place for, often complex, projects.

All policies placed are arranged through our long standing relationship with specialist insurers that have proven track records in the sector and a willingness to pay claims.

FAQs

There is no limit to how early an insured can come to the market with a request for insurance coverage. The more information the insured is able to share on the underlying transaction the more meaningful the feedback from insurers will be. If a deal is in its very early stages, insurers will only be able to provide theoretical feedback at best.

We can provide you a proposal form to complete which we can then take to the market.

Alternatively, we may request:

  • details of the counterparty
  • contract terms and conditions
  • information about insured goods/services
  • law and jurisdiction
  • payment terms
  • experience you have had with the counterparty.

By the insurers? The policy is cancellable by the insurers ONLY for the non-payment of premium by the insured.

By the insured? This policy is cancellable by the insured by written notice to insurers. Any premium in excess of the minimum and deposit that is unearned but already received by insurers shall be returned to the insured. Similarly, any premium in excess of the minimum and deposit that is earned but not yet received by insurers shall be payable by the insured.

You must notify the insurer as soon as possible (within a maximum of 30 days) and provide proof of loss within 90 days. From day 1 to day 90, you must act to minimise the effect of the loss. After day 90, underwriters will deliberate the claim and may request further evidence and information. Typically, by day 165 after the loss has been reported underwriters make a final decision on the validity of the claim.

There are some standard template Proof of loss forms which are usually included as an appendix in a policy. If your policy has one of these, then this will need to be filled out and submitted to JLT.

If no Proof of loss form is included, then the provision of proof of loss will need to include the following:

  • written confirmation by the insured that there has been a default under the insured transaction (email is sufficient)
  • proof that you have taken measures to retrieve the overdue payment from the obligor such as copies of emails or letters chasing for payment
  • summary of action taken by the insured to pursue payment from obligor

In addition to the above there may further information relating to the insured transaction that is requested by underwriters in order to process the claim. This will vary depending on the specifics of the policy wording.

Key Stats

Political risk Political risk Investment Risk Political risk 

WHY JLT

Investment risk

Clients wishing to purchase insurance for investment risks need to ensure that they select a broker with the relevant skills, knowledge and expertise in their business sector. We believe insurance contributes to the growth of your business as well as providing crucial protection in challenging circumstances.

Our multilingual team handle broking services for clients globally including many of the world’s leading corporations, financial institutions and government/multilateral agencies.

As a CPS client you will benefit from:

  • access to a diverse global team to deliver creative, comprehensive risk and insurance solutions which facilitate growth, reduce capital costs, improve returns, secure people and assets
Investment risk
  • ideas and products that positively impact risk mitigation and risk transfer strategies allowing you to make business decisions with confidence
  • our ability to create capacity to underwrite new and evolving risks
  • proprietary analytical tools to ensure you have access to complete and accurate real-time information which enables fact based decision making
  • experienced resources available where you need them without hierarchical, geography or financial barriers
  • consistent engagement through advisory, structuring, placement and claims, drawing in management leverage and technical expertise to ensure that when losses do occur we maximise recovery and minimise the impact on your operations.

CASE STUDY

INVESTMENT RISK

A power company that owns and operates power plants is considering purchasing an existing power plant. However, their investors are concerned that political risks could negatively impact the project and the value of the investment. The plant is contractually bound by a government backed Power Purchase Agreement (PPA) to supply power to the national grid for 20 years at pricing set under the PPA.

The power company is looking to mitigate the risk of government action or inaction that negatively impacts their investment. The primary concerns are expropriation of the assets, being forced to abandon the plant due to an outbreak of violence and the inability to repatriate either dividends or shareholder loan payments due to currency controls. In the event a dispute under the PPA leads to arbitration which rules in favour of the foreign owner, the investors are also concerned the government will not honour their guarantee in relation to an arbitration award.

We arranged political risk equity policies to protect the equity owners against action or inaction of the foreign governments that satisfied investors. The basis of cover included expropriation, forced abandonment, forced divesture, currency inconvertibility/ exchange transfer (CI/ET), arbitration award default and political violence.

The basis of the compensation being both the net investment value which reflects the acquisition price of the assets, the maximum compensation due under the PPA award following termination and a sublimit for CI/ET that reflected anticipated annual disbursements of dividends.

Claims capabilities

We deliver results. We deploy all resources to help resolve complex losses and deliver claim payments. Our track record is unblemished.

Our clients have confidence that the insurance policies we arrange for them are expertly structured and written by experienced insurers with strong track records in paying claims. Our approachable brokers work alongside our meticulous CPS claims professionals who specialise in handling, managing and negotiating claims.

In the unfortunate event of a loss:

  • You would have a single point of contact with overall accountability for all losses wherever they occur
  • Our proactive claims handling process would help maximise your recovery under your programme, while minimising the intrusion and interference to your on-going operations
  • We would leverage our strong relationships with the major leaders, loss adjusters and lawyers to help expedite the claims process
  • You would have access to our sophisticated pre-loss consulting and effective post-loss recovery services.

CPS ANALYTICS

Our starting point when structuring a new policy is to precisely understand your needs. Our brokers sit alongside a team of risk analysts drawn from security, technical and academic backgrounds.

Their substantial knowledge is utilised to help us understand the precise nature of your risk profile, thereby assisting us in determining the right insurance solution for your requirements.

Using ground-breaking modelling and rating tools, such as Sunstone and World Risk Review, our analysts can pinpoint risks, map exposures, analyse the risk triggers, and evaluate probable maximum loss (PML) ratios across a portfolio of assets.

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