Credit and political risk insurance market (CPRI)
The market of private insurers, largely concentrated in London, covering non-payment, contract frustration and political risks for investors, exporters and banks, alongside and in competition with public guarantees.
The private credit and political risk market brings together Lloyd's syndicates, London market companies and specialist insurers from Bermuda, continental Europe and Asia, underwriting three families of risk. Credit risk, mainly for banks insuring their loans and trade finance. Contract frustration, for exporters facing public buyers or political events. And investment political risk, expropriation, inconvertibility, political violence, for investors abroad. It differs from the public market through its shorter tenor limits, flexible wording and absence of national content requirements, and it complements it by covering what public agencies cannot or will not take. Its capacity, provided by some fifty underwriters, allows large programs to be placed through syndication. The market is highly sensitive to geopolitical events: sanctions against Russia in 2022, post-pandemic sovereign defaults and conflicts produced significant losses, followed by capacity cuts on the countries concerned and price increases elsewhere.
Textbook case: a mining investor wants to cover 600 million dollars of assets in a central African country against expropriation and inconvertibility. The broker places 200 million with a multilateral guarantor and 400 million in the private market, split among twelve London and Bermuda underwriters, for a five-year term.
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