What Does Political Risk Mean?
A political risk is a risk that is directly related to politics and can threaten certain assets. Government confiscation of assets, acts of war or terrorism, coups, and civil unrest are all examples of political risks that can cause various types of losses. Political risk insurance exists to protect against these losses.
Insuranceopedia Explains Political Risk
Political risks can also include issue related to currencies. For example, if an event causes a currency to no longer be converted into United States Dollars (or another relevant currency), this could be considered a political risk.
Political risk insurance is particularly important for people who have investments in areas with a lot of civil unrest. Major, sudden, political changes in those areas can result in enormous, unpredictable effects on a policyholder's assets. A political risk policy can hedge against these losses.