Political Risk Insurance for Private Equity Investment

Facilitating private equity investment in emerging markets

Emerging markets often present strong commercial opportunity for private equity investors, yet ever-changing political risks poses risks to investment returns.

Political risk insurance helps protect against unpredictable losses and the strategic use of this insurance can increase the range of acceptable investment targets, without compromising on risk tolerance. As one of the world’s largest brokerage and risk-management companies, we understand the challenges you face in managing your portfolio.

No matter your investment size, targets or market risks, you can rely on our structured credit and political risk team to develop a solution to help you realise your commercial ambitions.

What is political risk insurance?

For private equity investors in a crowded marketplace, emerging markets can offer intriguing opportunities. Yet fears over a country’s political risk profile can limit investor appetite and reduce the range of investments that a fund will consider.

Political risk can come in many forms, including nationalisation, expropriation, forced abandonment, war and embargo. As a result, private equity investors typically adjust the internal cost of capital to compensate for political risk, which can threaten the competitiveness of a bid as a result.

Alternatively, political risk insurance premiums are typically a fraction of the increased cost of capital that investors will require for political risks. With a suitable policy in place, you can enable a wider range of investments without the need to adjust risk tolerance.

What does political risk insurance for private equity investment cover?

The global political risk insurance marketplace is able to offer more coverage than ever before, and new capacity is entering the market regularly. With policy limits in excess of USD3bn and policy periods up to 20 years now possible, political risk insurance premiums are now much more competitive than they used to be.

Every political risk insurance policy is built with the client’s risk profile in mind. Typical coverages include:

Confiscation, nationalisation and expropriation
Civil unrest, terrorism and war (plus numerous other political violence perils)
Currency inconvertibility and exchange transfer risk, and currency repatriation risks
Selective discrimination; changes to laws and regulations that detrimentally impact one investor or one particular industry
Breach of contract / contractual agreement repudiation
License cancellations and embargoes.

Why choose us for your political risk insurance?

At Gallagher, our proposition is to offer more than insurance to our private equity clients. Experience in managing risks for the private equity sector is a focus of our Structured Credit and Political Risk team. You can trust us to help make this complex risk environment a more rewarding one.

Political Risk Insurance for Private Equity investment

Bespoke political risk insurance for private equity investment to reduce risk and increase opportunity
Extensive experience of insurance and risk management for emerging markets
Strong relationships with a range of specialist insurers and underwriters
Dedicated in-house claims team for fast and satisfactory settlements