Higher and lower coinsurance percentages are available. No deductible applies when the coinsurance form is used. In a somewhat typical loss situation, the insurer now has a claim against the bankrupt firm as an unsecured creditor. Supplier's recovery of part of its coinsurance penalty is very similar to the automobile subrogation recoveries that happen in some states. This would be for a firm insuring just domestic exposures or an exporter that is not insuring political risk.
Political risk is a loss exposure faced by firms doing business on an international basis.
Essentially, political risk is a situation in which a foreign government prevents a firm in that country from paying what it owes to a United States firm. Other actions that foreign countries have taken are confiscation, expropriation and nationalization of property. In these situations a country takes over the ownership of a firm. Regardless of the name used to describe the situation, the result is the same. Due to the action of a foreign government, the United States firm is unable to collect its accounts receivable.