Does Your Global Business Need Political Violence or Political Risk Coverage?

Does Your Global Business Need Political Violence or Political Risk Coverage?

April 11, 2024

If you have global or affiliate operations in politically unstable areas, take extra measures to protect your assets. Political violence insurance, or terrorism insurance, protects your business’s physical assets against political upheaval and terrorism. Political risk insurance protects against arbitrary government actions. Examples of global industries that may benefit from these types of policies include:

  • Nongovernmental organizations (NGOs) and other nonprofits
  • Schools
  • Energy and utility companies
  • Investors and venture capitalists
  • Mining and construction operations
  • Retail
  • Hotels and tourism
  • Financial institutions
  • Real estate
  • Transportation infrastructure

There are a few differences between political violence and political risk, which we’ll explain below. You can get a policy for one or both to design a package for your unique needs.

Political violence insurance

Political violence insurance protects your business from physical damage to property and assets. It covers events standard insurance doesn’t cover, such as:

  • Terrorism
  • Sabotage, mutiny and coups
  • Riots, strikes and civil unrest
  • Insurrections, revolutions and rebellions
  • Political violence, including wars and civil wars
  • Looting and pillaging
  • Ongoing threats

How political violence insurance works

Imagine you own a chain of retail stores, some in a geopolitically unstable region. An outbreak of violent protests results in looting and fires. Several of your stores are damaged, and your inventory is destroyed. Your business suffers significant financial losses due to the physical damage and store closings, affecting revenue. Your political violence insurance would help offset these losses.

Let us help you create a plan that works for direct and indirect revenue losses.

Political risk insurance

Political risk insurance is another layer of protection for companies doing business abroad. Companies might invest or operate in emerging markets to expand into high-growth economies, establish manufacturing bases or be closer to material resources. But sometimes, emerging markets are in regions at higher risk of political upheaval and instability.

Consider the following scenarios:

  • A new political regime imposes restrictive import and export rules and creates blockades in response to disagreements. This brings your business to a halt.
  • The local government imposes currency exchange controls. This makes it impossible to convert your company’s accounts to your home currency, cutting access to funds and destroying profits.

Governments can divest companies of their holdings or confiscate their assets. Even if a government doesn’t seize your assets outright, it can pass laws or take other actions to restrict your rights to access those assets.

These events can directly impact your operations or profitability.

Standard business insurance doesn’t respond to these perils, but political risk insurance does. It protects your business against financial losses from political instability, such as:

  • Confiscation and expropriation of assets
  • Forced divestitures
  • Breaches of contract or license cancellations resulting from sudden political changes
  • Cessation of imports and exports
  • Restrictions on foreign currency exchange
  • Inability to repatriate profits
  • Sanctions and tariffs

How political risk insurance works

Say you own a mining company. You expand your operations to a new site in a developing country. After two years, the local government expropriates your mine due to a change in domestic policy. It does not compensate your business. You’ve invested millions of dollars in equipment, infrastructure and personnel, and it’s all gone overnight. Your political risk policy would help with these financial losses.

Call us

You can’t control the geopolitical environment but you can install a safety net. Call us for a coverage review and quote. 

We’re an independent agency. That means we work for you, not the insurance carriers. We’ll design a protection program for your unique operations and geopolitical concerns. We're here to help you find the best risk management solutions.