Credit & Political Risk Insurance Keeping The Wheels Of Global
Transcript of Credit & Political Risk Insurance Keeping The Wheels Of Global
![Page 1: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/1.jpg)
Credit & Political Risk InsuranceKeeping The Wheels Of Global Trade and Investment Turning25 October 2011
Martin PhelanManaging Principal, Political Risk & Structured Credit
AUS - Melbourne
![Page 2: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/2.jpg)
1MARSH
Agenda
• Context– Global Trade & Foreign
Investment– Current Events, Trends– Country Case Studies
• Credit and Political Risk Insurance – Foreign investments – Contract risks– Buyers and applications
• Historical claims
• Market participants
![Page 3: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/3.jpg)
2MARSH
ContextGlobal Trade & Foreign Investment
CIA World Factbook estimates:
• 2010 Global Exports – USD 15.18 trillion
• 2010 New Foreign Direct Investment – USD 1 trillion
Berne Union* 2010 Yearbook Statistics:
* The Berne Union is an international association of credit and investment insurers representing both national government and other public providers and commercial market participants.
![Page 4: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/4.jpg)
3MARSH
Emerging Trends and DevelopmentsGlobal factors, trends and motivations
• Political risk is also cyclical …the old becomes new again…
• Supply/security of resources as a geopolitical issue
• Globalisation – value of and dependence on trade and supply chains
• Commodity prices – now vs. ‘then’, implications & outlook
• Nationalistic/socialistic/populist governments
• BRIC’s – (one ‘i’ or two?) full of opportunities and challenges
• The Arab Spring – how quickly ‘political stability’ can turn
• Conflict zones & the ‘Resource Curse’– DRC and Africa, Philippines, Indonesia, PNG and the Pacific Rim
• What’s next: ‘conflict’ (political and/or military?) over food, water, etc.?
![Page 5: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/5.jpg)
4MARSH
Political Risk – illustrating the diversity in underlying pressures
![Page 6: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/6.jpg)
5MARSH
Country Case Studies Political Risk can be dynamic
Ivory Coast: once the ‘jewel of Africa’ Libya: don’t overrate ‘political stability’…
![Page 7: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/7.jpg)
6MARSH
Country Case StudiesSome of our regional partners
Indonesia: some positives… China: in line with perceptions?
![Page 8: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/8.jpg)
7MARSH
Country Case StudiesAnd for context…
South Africa vs. Sub-Sahara Average Australia: what price minority gov’t?
![Page 9: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/9.jpg)
8MARSH
3. EXPROPRIATION COVERAGE
INCLUSION OF CONFISCATION, EXPROPRIATION, NATIONALIZATION, REQUISITION AND
SEQUESTRATION OF THE INSURED’S “FOREIGN ENTERPRISE” (VIA A TAKING OF ITS ASSETS OR
SHARES); … INCLUDING BREACH / UNILATERAL RENEGOTIATION OF LICENSES OR CONCESSIONS
THAT ARE FUNDAMENTAL TO SUCCESSFUL, CONTINUED OPERATIONS OF THE
INSURED’S FOREIGN ENTERPRISE.
Political Risk InsuranceInvestments and assets in foreign countries
BASIC TERRORISM COVERAGE
A COMMON ADD-ON TO PROPERTY INSURANCE
1. POLITICAL VIOLENCE COVERAGE
INCLUSION OF WAR, CIVIL WAR, RIOTS, STRIKES AND CIVIL COMMOTION,
REBELLION, REVOLUTION, INSURRECTION AND TERRORISM
2. FORCED ABANDONMENT COVERAGE
INCLUSION OF ABANDONMENT FOLLOWING PERMANENT /
TOTAL CESSATION OF OPERATIONS IN CONSEQUENCE OF A
GOVERNMENT ACT OR POLITICAL VIOLENCE
OTHER ADD-ON COVERAGES
![Page 10: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/10.jpg)
9MARSH
� Pre-shipment risks�Sovereign Repudiation�Embargo�Licence Cancellation�War
� Post-shipment risks�Comprehensive Nonpayment
� On- Demand Bonds�Unfair Calls (Sovereign entities)�Fair Calls (Political)
Political Risk and Structured CreditContract Risks
![Page 11: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/11.jpg)
10MARSH
Summary of Insurable Exposures
Investment Mobile Assets
On-Demand Bonds
Contract (Private C’party)
Contract (Public C’party)
Terrorism / Sabotage a a a a a War / Civil War
a a a a a Export / Import Embargo a a a a a Expropriation
a a a a a Gov’t Law, Order or Decree
a a a a a
Currency Transfer Restriction
a a a
Non Payment / Delivery
a a
Exposure
Eve
nts
![Page 12: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/12.jpg)
11MARSH
Historical Claims Structured Credit & Political Risk
• Expropriation – Venezuela (Steel, Cement,
Supermarkets, Oil Rigs)
– Bolivia (Mining)
– Argentina (Steel)
– Peru (Belco Petroleum)
• Political Violence (Damage)– Libya (regime change)
– Thailand (Retail sector)
– Yemen (Oil, Al Quaeda, Tribal)
– India (Taj Mumbai)
– Solomon Islands (Ethnic)
• Currency Transfer– Argentina (Pesification)– Ukraine (Credit crisis)– Brazil, Mexico, Russia
• Licence Cancellation – India (Enron/Bechtel)– Guinea Conakry (Bauxite mine)– DRC (Copper Mine)
• Structured Credit– Bahrain (TIBC) – Ukraine (Nadra, Ukrgasbank)– Kazakhstan (Alliance Bank)– Commodities (Egypt, Brazil,
Russia)
![Page 13: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/13.jpg)
12MARSH
Structured Credit & Political RiskBuyers and typical applications
Political Risk Insurance
• Banks lending internationally:– Project finance– Export & Commodity finance– Performance guarantees– Corporate loans– Commodity hedging
• Companies (investors) with international operations– Operating subsidiaries/projects– Large plant & equipment fleets
• Companies trading internationally
Structured Credit Insurance
• Banks lending for:– Trade finance – Export & Commodity finance – Pre-payment, warehouse &
inventory finance– Equipment finance– Corporate loans, guarantee’s
and other trading related activity
• Banks managing their exposure to other banks, governments, etc.
• Exporters and traders managing credit and other contractual risks
• Commodity and other traders
![Page 14: Credit & Political Risk Insurance Keeping The Wheels Of Global](https://reader031.fdocuments.in/reader031/viewer/2022020706/61fc88f58d33c02b785e4cfd/html5/thumbnails/14.jpg)
13MARSH
Political Risk Market