As the Arab Spring unfolded, the continuation of a client’s trading activity with Syrian customers represented both high risk and commercial opportunity. Underpinning the client’s comfort was a multi-year political risk programme covering its sugar stocks located in the outskirts of Homs Syria, against the risk of the local government expropriating the stocks concerned or otherwise preventing their re-export. Forced abandonment due to political violence (essentially terrorism and war risks), together with physical damage caused by political violence were also covered.
Against this backdrop the client continued its activity until the expiry of the multi-year political risk programme loomed in 2012. The client’s Syrian trading activity had been greatly reduced so the renewal of the multiyear political risk programme ex-Syria was manageable, providing adequate insurance protection could be arranged to cater for the main threat to the remaining stocks: their destruction by a stray shell prior to a sale being concluded. The option of keeping the stocks in the warehouse was preferable to attempted extraction.
The challenge was to secure cover against the risk of the ongoing political violence causing physical damage to the stocks concerned. Simultaneously the client needed to demonstrate robust operational control set against one of the most demanding security backdrops conceivable in order to justify insurer support.
Eventually underwriters were persuaded to support and, whilst no loss occurred, this case is remarkable due to the fact that a potential loss under the political risk programme was avoided (attempted extraction could have precipitated a loss) and the client was able to maintain the continuity of its business in spite of the circumstances.
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For more information, please contact Edward Nicholson, Partner, Credit, Political & Security Risks on +44 (0)20 7528 4522