EFIC taking the risk out of politics

Business Asia, April, 2004

The Export Finance and Insurance Corporation (EFIC) has introduced a new political risk insurance policy for plant and equipment to meet the specific needs of the mining, engineering and construction sectors.

"Companies take out political risk insurance when exporting or investing overseas to cover themselves against financial losses resulting from specified political events," says Chang Foo, head of product management and risk transfer at EFIC.

"Our new political risk insurance policy for plant and equipment can cover Australian investors or contractors if a specified political event damages or deprives them of the use of assets employed in an overseas investment or project," says Chang.

This new policy adds to EFIC's existing political risk insurance policies which provide PRI cover for investors or lenders. The organisation's political risk insurance policies already cover lenders financing projects, overseas investors or export contractors against losses arising from any one or a combination of the following risk events: expropriation, such as nationalisation of an investment or plant and equipment by the overseas host government; war damage or political violence; currency inconvertibility and exchange transfer blockage; and sovereign breach of contract.

The policies are generally available for extended terms of up to 10 years, reflecting the nature of the investment or corresponding to the underlying loan or contract period.

"We continue to examine a number of product initiatives in the area of political risk insurance, as this is where we see a market gap in terms of available commercial capacity for terms extending out to 10 years," says Chang. "EFIC is committed to working with private market political risk insurers whenever possible to leverage capacity for the benefit of Australian investors and exporters."