Have you ever wondered what happens to business investments when a country’s political situation goes haywire?
Things like civil wars, government confiscation of property, extreme currency fluctuations, and even acts of terrorism are not as uncomon as we’d like them to be.
These political risks pose serious threats to commercial investments made by MNCs, financial institutions, exporters, and developers. The danger of assets declining severely in value or getting confiscated entirely looms large in developing markets.
So, in order to hedge against these risks, businesses opt for a special type of cover known as Political Risk Insurance.
This policy protects businesses and investors from losing money due to unexpected political events, such as:
- Sudden seizure of assets
- Political violence
- Sovereign debt default
- Terrorism or civil unrest
Political Risk Insurance usually comes with coverage amounts ranging in the millions, primarily protecting those companies engaged in foreign investments. This way companies can easily undertake risky projects without having to worry about losing a major chunk of their capital.
Financial risks are not just a bother for large enterprises. Small businesses have to deal with countless common perils operating on domestic grounds.