Types of Coverage
Protects conversion and transfer of earnings, returns of capital, principal and interest payments, technical assistance fees, and similar remittances. This product insures against potential host country government acts.
- New, more restrictive foreign exchange regulations
- Failure by an exchange control authority to approve of -- or simply to act on -- an application for hard currency
- An unlawful effort by the host government to block funds for repatriation
- Discriminatory host government actions resulting in an inability to convert and transfer local earnings
DFC’s inconvertibility coverage does not protect against the devaluation of a country’s currency.
Protects against acts of expropriation and other forms of unlawful interference by the host government that deprive investors of heir fundamental rights in a project. Government interference in a project can take many forms including
- Confiscation and creeping expropriations
- Abrogation, repudiation, or impairment of contract, including forced renegotiation of contract terms
- Imposing of confiscatory taxes
- Confiscation of funds and/or tangible assets
- Outright nationalization of a project
DFC can provide arbitral award default and denial of justice coverage for U.S. debt and equity investors, protecting the insured from nonpayment of an arbitral award by a host country government.
- Bid, Performance, Advance Payment, and Other Guaranty Coverages
Guarantees issued on behalf of a U.S. exporter of goods or services, or a U.S. contractor in favor of a foreign government buyer can be covered against the risk of a wrongful calling. The guarantees usually are in the form of irrevocable, on-demand, standby letters of credit. A wrongful calling is one that is not justified by the terms of the underlying contract, or the invitation for bids.
In the case of a bid guaranty, the insured may file a claim when it believes a wrongful calling has occurred and DFC will make a determination. With performance, advance payment and other guaranties, the insured must invoke the dispute resolution procedure in its contract with the foreign buyer before DFC will pay compensation.
- Political Violence
Protects against assets and income losses caused by:
- Declared or undeclared war
- Hostile actions by national or international forces
- Revolution, insurrection and civil strife
- Terrorism and sabotage
Investors may purchase this insurance for Assets, Business Income, or both. In addition, DFC can provide coverage for:
- Evacuation expenses
- Income losses resulting from temporary abandonment of a project caused by political violence
- Income losses resulting from damage to specific sites outside the insured facility, such as a critical railway spur, power station, or supplier.
To increase underwriting capacity and support development in countries where investors have difficulty obtaining political risk insurance, DFC can reinsure licensed U.S. and international insurance companies.
- Breach of Contract for Capital Markets
DFC political risk insurance supports U.S. capital market financing structures that catalyze private capital in emerging markets.