Types of Coverage
- Currency Inconvertibility
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.
- Expropriation
Protects against acts of expropriation and other forms of unlawful interference by the host government that deprive investors of their fundamental rights in a project. Government interference in a project can take many forms including:
- Nationalization
- 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 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 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.
- Reinsurance
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 capital market financing structures that catalyze private capital in emerging markets.