The property of a peril whose occurrence depends on a decision by the insured or a third party, the opposite of the exogeneity pricing assumes.
Insurance assumes the exogeneity of the peril, that the event depends neither on the insured nor on the insurer, but on chance. Endogeneity is the reverse case, where the peril proceeds from a will that observes the insurance and adjusts its conduct. Country risk offers the pure example, expropriation or inconvertibility are decisions of the sovereign, who knows a cover exists and may be deterred if the guarantor can compromise its access to finance, or disinhibited if the victim is already indemnified. A peril endowed with a will does not price like a draw from nature, which sets political risk apart from every other.
The existence of expropriation cover alters the host state's political calculus, a deterrence or disinhibition effect that is the exact opposite of the exogeneity pricing assumes.
exogénéité, péril endogène