Business Risks During Unpeaceful Transfers of Power
In democratic countries across the globe, the peaceful transition of power is often smooth and does little to disturb the markets or the economy. But violent takeovers in other nations can pose real threats to Western companies, especially those interested in expanding to new, emerging markets. For Western companies investing in regions prone to hostile regime changes, being aware of the associated risks can prevent significant losses.
For Western companies investing in regions prone to hostile regime changes, being aware of the associated risks can prevent significant losses. Should a foreign government confiscate a business’s assets or prevent a business from operating, then political risk insurance may come into play.
Modern political risk insurance first emerged after World War II, when the Marshall Plan promoted economic recovery programs in Western European nations, according to the National Association of Insurance Commissioners (NAIC). In the decades since, the coverage has evolved into a robust market offering bespoke cover against the expropriation of property, political violence, inconvertibility of currency, forced abandonment or forced divestiture, consequential financial loss, non-repossession assets, and trading risks.