Political risk insurance (PRI)
Cover for investors and exporters against a foreign government's acts: expropriation, currency inconvertibility, political violence and sovereign default.
On April 16, 2012, Argentina announced the expropriation of 51% of YPF, a Repsol subsidiary; the compensation, agreed in 2014, was paid in government bonds worth 5 billion dollars. Political risk insurance (PRI) protects investors, lenders and exporters against that kind of act by a foreign government, and the policy names its covers one by one. Confiscation, expropriation, nationalization and deprivation (CEND): the state takes the asset, at once or through a string of measures. In Niger, Orano lost the Imouraren permit in June 2024, and Somaïr was nationalized on June 19, 2025. Currency inconvertibility and transfer restriction: the money is in the account and cannot leave. Argentina's decree 609/2019 of September 1, 2019 brought back exchange controls, and most of them were only lifted in April 2025. Political violence: war, riot and terrorism, when they damage the asset. On June 25, 2024, protesters in Nairobi stormed Parliament and set part of it on fire. Sovereign non-payment and contract frustration: the public counterparty does not pay, or the contract becomes impossible to perform for a political reason. In February 2011, Turkish contractors evacuated Libya, leaving some fifteen billion dollars of public works behind. The hard part is separating an act of government from a measure of general application, lawful and non-discriminatory, which no wording covers: a tax hike stays outside, pulling a license can come inside. The indemnity is paid after a waiting period during which the act must persist, and the insurer then takes over the insured's rights against the state, all the way to ICSID arbitration. MIGA, a World Bank affiliate, is the leading multilateral player; in France, Bpifrance Assurance Export has run public export guarantees since January 1, 2017; Lloyd's and the London market provide the private capacity. The same risk sits inside cyber contracts. On June 27, 2017, NotPetya stopped Maersk and Merck; London and Washington attributed it to Russian military intelligence on February 15, 2018, eight months later. Merck was claiming about 1.4 billion dollars, and on May 1, 2023 the New Jersey Appellate Division held that the “hostile or warlike action” exclusion meant war in the classic sense. The market answered with LMA 5564 to 5567, published in November 2021, which leave attribution first to the state where the affected systems sit. Sanctions do the rest: since OFAC's advisory of October 1, 2020, updated on September 21, 2021, a ransom paid to a designated group implicates whoever pays and whoever facilitates the payment, insurers included. AlgoPolis underwriting notes, dated and signed, decide these cases one at a time, and each will be read again against what actually happened.
Dated case, in Africa: in June 2024, Niamey withdrew Orano's operating permit for the Imouraren uranium deposit; in December 2024, the group recorded the loss of operational control of Somaïr, and on June 19, 2025 Niger's government announced its nationalization. A permit pulled, then control lost, then title taken: that is the order in which a CEND policy sees the loss arrive, and the waiting period runs on each step. Dated case: on April 16, 2012, Argentina announced the expropriation of 51% of YPF, a Repsol subsidiary, and the compensation agreement reached in 2014 came to 5 billion dollars in government bonds. Dated case, on the arbitration side: ConocoPhillips' oil assets in Venezuela, nationalized in 2007, led on March 8, 2019 to an ICSID award (case ARB/07/30) of about 8.7 billion dollars plus interest, immediately met with an application for annulment. Twelve years passed between the act and the award. A political risk policy spares the insured that wait, since it is paid after the waiting period and the insurer keeps the recourse. Textbook case, for the mechanics: a European energy producer invests 200 million euros in a gas plant in Central Asia and covers expropriation and inconvertibility; two years later, a new government nationalizes part of the asset without compensation, and the insurer pays on the net book value agreed at underwriting.
- Convention Establishing the Multilateral Investment Guarantee Agency (MIGA), 1985
- ICSID, ConocoPhillips Petrozuata B.V. and others v. Venezuela, case ARB/07/30, award of March 8, 2019
- World Nuclear News, "Orano opposes Somaïr nationalisation", June 20, 2025
- Exportkreditgarantien der Bundesrepublik Deutschland, "In eigener Sache", March 30, 2022 (the federal mandate kept out of the rebrand)
political risk, PRI, expropriation, nationalisation, MIGA, CEND, political risk insurance, political risks insurance, PRI insurance, political risk cover, politcal risk insurance
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