Political Risk Insurance

What Does Political Risk Insurance Mean?

Political risk insurance protects against losses resulting from specific political activities. It is commonly purchased by companies conducting business in foreign countries. It is one of several specialized types of business insurance designed for companies with exposure beyond standard domestic operations.

Risks typically covered by this insurance include expropriation insurance, currency inconvertibility, nationalization, confiscation, terrorism, and export credit.

Insuranceopedia Explains Political Risk Insurance

Political risk insurance is often essential for companies investing in businesses located in politically unstable countries. Without this insurance, companies may consider it too risky to engage in business with companies in certain nations.

In some cases, entire currencies can be rendered worthless through inflation, as occurred in Zimbabwe in the early 2000s. Political risk insurance protects against losses related to such currency events. Companies that ship goods internationally may also pair this coverage with commercial marine insurance to protect both the physical cargo and the financial exposure tied to unstable trade routes.