In recent years, insurance against political risks affecting international investments and trade transactions has developed in the private market

alongside the coverage offered by national and multilateral underwriters of such exposures. The private and official markets can be sources of

both complementary and alternative coverage. Each of these markets has its particular advantages and limitations for the purchaser of

political risk insurance.

The Private Market

Private carriers of political risk coverage generally are more flexible than official insurers since their operations are not inhibited by

considerations of public policy or international relations. As a result, private political risk insurers are capable of underwriting exposures

attendant to new and existing investments in any country without regard to such factors as the investor’s nationality, the host country’s level of

economic development, or the investment’s economic effects upon the investor’s home country. In addition, private underwriters generally

offer political risk coverage for both trade and investment exposures, and, since many carriers also provide standard property and casualty

insurance, they may offer, on very favorable terms, coverage packages combining political and commercial risk protection. Furthermore,

unlike official insurers, whose assistance is a matter of public record and which must be disclosed to host country governments, private

underwriters generally regard the existence of their insurance as a confidential matter.

The Official Market

Official insurers, while lacking some of the flexibility and advantages available through the private political risk insurance market, offer other

special capabilities. Official insurers commonly underwrite the risks of currency inconvertibility and political violence. Furthermore, official

political risk insurers are able to provide coverage which is bound, at fixed rates, for durations commensurate with the long-term exposures

(up to 20 years) attendant to most investment projects. In recent years, the private market has begun to offer coverage for up to 15 years.

OPIC and the Private Market

While some investors may be able to secure investment insurance that meets their needs exclusively in the official market or the private

market, in some circumstances it will be necessary or advantageous for them to use both markets to obtain the coverage that most closely

accommodates their needs. OPIC encourages prospective clients to consider the availability of private political risk insurance and welcomes

the opportunity to cooperate with private underwriters to provide coverage that most closely accommodates U.S. investors’ insurance

requirements. The following examples illustrate some of the ways in which OPIC insurance can be combined with private market coverage in

order to satisfy investors’ needs.

Old and New Investments

OPIC insurance is available for investments in new ventures and for privatizations, expansions, or modernizations of

existing enterprises. Consequently, OPIC may be unable to provide complete coverage in the event that an investor wishes

to insure existing as well as prospective investments in a venture. In such circumstances, the investor may be able to

obtain the political risk protection it needs by insuring new investments with OPIC and securing coverage through the

private market for its existing exposures.

Different Markets for Different Coverages

For some investments, all of the coverages desired may not be available from either private or official insurers. For

instance, private insurers may be willing to assume only an investor’s expropriation risk, whereas OPIC may be willing to

underwrite other exposures as well. In such cases, the investor may purchase expropriation coverage from a private carrier

and protect its investment against inconvertibility and political violence exposures with OPIC insurance. Similarly, investors

may be able to obtain private market coverage exclusively for events that are not compensable under OPIC’s insurance

contracts, such as partial expropriations or losses related to U.S. economic embargoes.

Avoiding Overlap

In certain circumstances, an investor’s commercial or property/casualty coverage may contain limited elements of political

risk protection that are provided for under OPIC’s standard coverage, such as insurance against damage to physical assets

resulting from politically-motivated civil commotion or disturbances. If requested to do so, OPIC or the private market may

tailor their coverage in order to exclude any redundant elements, thereby contributing to the cost effectiveness of the

investor’s insurance requirements.

Coinsurance Opportunities

For large investments or for projects in countries in which insurers possess limited underwriting capacity, sometimes

neither private nor official insurers alone may offer enough of a coverage to satisfy investors’ needs. In such circumstances,

OPIC insurance may be combined with private market coverage in order to provide a sufficient amount of political risk

protection. When the same type of coverage is provided jointly by OPIC and a private carrier, arrangements for claims

management can be established at the outset to ensure proper coordination of the insurers’ actions in the event of a claim.

Cooperation to Extend OPIC Coverage

When OPIC policies reach their twenty year expiration, they may be continued if a U.S. insurer is willing to assume at least

one half of the risk. This risk-sharing may be achieved by equal assumption of the same risk(s) by OPIC and the private

carrier or by each insurer underwriting a separate risk covered by the expiring policy.

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