Foreign investment insurance

Foreign investments, especially in emerging countries, may be related to political uncertainty. The statutory framework in such countries often lacks legal certainty and foreign investments can be affected by sudden political changes or arbitrary government action.

 

Many forms of investments may be insured. The most common are:

  • an equity creation or participation in a foreign company; the contribution may either be pecuniary or in nature;

  • investment loans with long-term repayment terms (from 3 to 15 years).

 

The investor is compensated for full or partial loss of the investment and for not being able to transfer the invested funds out of the host country, provided the losses are the direct consequence of one of the following political events:

  • Expropriation (all forms of nationalization and confiscation, as well as any government action discriminatory in nature and taken against investors or companies in the host country)

  • War

  • Transfer restrictions where it is made impossible to transfer invested funds as a result of currency shortages or a general moratorium imposed in the host country

  • Breach of contract, meaning the non-fulfillment or non-compliance with contractual obligations. Those may have been concluded between on the one side the investor or the company in which the investment is realised and on the other side the public authorities of the host country, or government entities or entities regulated by the government.

 

In order to qualify for compensation, the sustained loss must be final and irreversible.

 

The insurance normally covers the capital value, but may be extended to the investment income (interests and dividends) as well as to potential further investments.

Photo - Assurance-Crédit