The risk attached to a sovereign state's decisions affecting an investment, expropriation, inconvertibility, breach of contract.
Country risk covers the losses an investor suffers from a decision of the host state, nationalization of its plant, blocking of dividend repatriation, repudiation of its concession. It differs from mere political violence by its endogeneity, the peril is a sovereign will, not a hazard. It refuses both postulates of insurance, the independence of losses, since a crisis strikes a whole territory, and exogeneity, since the sovereign observes the cover. Its ultimate singularity is recovery, the insurer must turn against a state shielded by its immunity, so the quality of recourse is measured in diplomatic power, not in own funds.
Country risk is not uninsurable, it is misallocated, the frequency to the private market, expropriation to multilateral guarantors and war to public schemes of last resort.
risque politique, risque souverain