AT A GLANCE
How the protection works
Credit and political risk insurance can protect defined payment obligations, contracts, assets or investments against specified commercial non-payment or political events.
A useful presentation should identify the insured transaction, buyer or obligor, amount and tenor, payment terms, countries, security or guarantees, government involvement, political dependencies, concentration exposures and previous losses or payment difficulties.
CREDIT & POLITICAL RISK
What may be covered
- Commercial non-payment by a defined buyer, borrower or other obligor where that peril is insured.
- Political violence, expropriation, currency inconvertibility or transfer restriction where specifically included.
- Contract frustration or non-honouring of sovereign or public-sector obligations where provided by the policy.
- Investment or asset exposure to specified political events in relevant jurisdictions.
Cover is transaction-specific and depends on the insured peril, obligor, country, waiting period, exclusions, limits and policy wording.
BOUNDARIES
Common exclusions and limitations
- Known defaults, disputes or political events existing before attachment.
- Obligors, countries, transactions or causes of loss outside the insured definitions.
- Sanctions or legal restrictions that prevent the insurer from providing or paying cover.
- Failure to comply with notification, recovery, consent or preservation-of-rights requirements.
This is not a complete list. The transaction, policy schedule, exclusions and full wording determine the protection.
CLAIMS IN PRACTICE
How a claim might arise
01. A buyer or borrower fails to make an insured payment following a covered commercial default.
02. A currency-transfer restriction prevents funds being converted or remitted from the insured country.
03. A government action interferes with an insured contract, asset or investment and results in a covered financial loss.
These examples are illustrative only and do not confirm that a particular claim would be covered.
QUESTIONS
Frequently asked questions
What is the difference between credit risk and political risk?
Credit risk concerns failure by a buyer, borrower or other obligor to pay. Political risk concerns specified governmental or political events that interfere with payment, contracts, assets or investments.
What information should be prepared?
Useful information commonly includes the transaction structure, obligor, amount and tenor, payment terms, countries, security or guarantees, public-sector involvement, political dependencies and previous losses.
Why do countries and government counterparties matter?
The location of the risk and the role of public authorities can materially affect transfer, contract, expropriation and sovereign-payment exposures.
For wider proposal preparation, see the DIBNI Commercial Insurance Proposal Guide.