Forced abandonment
A political risk cover that indemnifies an investor forced to leave its facilities because of political violence or an order from the authorities, even if the assets are not destroyed.
Forced abandonment is an extension of political risk and political violence policies that responds to a situation the property cover cannot see: the investor has lost nothing physically, its facilities are intact, but it had to leave them because the safety of its staff could no longer be ensured or because its own government or the host country's ordered an evacuation. The asset still exists, but it no longer produces, can no longer be looked after, and its value erodes. The cover generally responds after a waiting period during which return remains possible, often several months, and indemnifies the net value of the abandoned investment, sometimes the business interruption. Underwriting it requires a precise definition of the trigger, an official evacuation notice rather than the insured's own judgment, otherwise the cover becomes an exit option funded by the insurer. It illustrates the core of political risk: the loss is not a physical event but an inability to act, decided or caused by a public authority.
In February and March 2011, foreign oil companies evacuated their staff from Libya, and the country's output fell from about 1.6 million barrels a day before the conflict to a few tens of thousands at its low point: entire fields were abandoned without being destroyed.
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