RISK MITIGATION: What are Updates & Proposals on Risk Mitigation Products?

Product Name Political Risk Insurance
Link to Product Website
Provider Name Lloyds
Product Definition Lloyd's is the world's specialist insurance market. Unlike many other insurance brands, Lloyds is not a company; it's a market where our members join together as syndicates to insure risks.

Much of Lloyd’s business works by subscription, where more than one syndicate takes a share of the same risk. Business is conducted face-to-face between brokers and underwriters in the Underwriting Room.

When we talk of Lloyd’s, we’re really referring to two distinct parts. The market, which is made up of many independent businesses, and the Corporation of Lloyd’s, which is there – broadly speaking – to oversee that market. These parts are distinct, but far from independent. Both work closely to maintain high standards of performance across the market.

The Lloyd's Market: The Lloyd’s market is home to 57 managing agents and 87 syndicates, which offer an unrivalled concentration of specialist underwriting expertise and talent. Business at Lloyd’s is still conducted face-to-face, and the bustling Underwriting Room is central to the smooth running of the market. The market structure encourages innovation, speed and better value, making it attractive to policyholders and participants alike. Immediate access to decision-makers means that answers on whether a risk can be placed are made quickly, enabling the broker to provide fast, good-value solutions.

The majority of business written at Lloyd’s is placed through brokers who facilitate the risk-transfer process between clients (policyholders) and underwriters. Clients can discuss their risk needs with a broker, a coverholder or a service company. Specialist underwriters for each syndicate price, underwrite and handle any subsequent claims in relation to the risk.

Political Risks Insurance (Risk location guidance for political risks insurance):

1) Trade-related cover: This includes insurances of risks such as import/export embargo, non-payment or non-delivery of pre-paid goods, licence cancellation, unfair calling of on-demand contract bonds.

The location of risk is determined by the insured’s location. These insurances are purchased by companies or other corporate bodies, so the location of risk depends on the country in which the insured’s business establishment most closely associated with the risk is located. The country or countries in which events leading to insured losses could take place are not relevant to the location of risk.

2) Insurance of assets against political violence: This is insurance of property against perils that may include war on land, terrorism, riots, strikes, civil commotion and malicious damage. This is property insurance. Guidance on the location of risk can be found under “Property and fire insurance”.

3) Other asset cover: This includes such insurances as confiscation of fixed or mobile assets, inconvertibility of foreign currency and aircraft repossession.

It is usually reasonable to determine the location of risk in accordance with the insured’s location. These insurances are purchased by companies or other corporate bodies, so the location of risk depends on the country in which the insured’s business establishment most closely associated with the risk is located. The country or countries in which events leading to insured losses could take place are not relevant to the location of risk.

Example (based on UK HM Revenue and Customs guidance):

A UK-based company takes out a political risks insurance contract to cover assets of an overseas subsidiary or business establishment.

The risk will be located in the UK if the contract protects the investment of the UK company in the overseas subsidiary or establishment and compensates it for the loss of capital invested. UK Insurance Premium Tax (IPT) will be due on the whole premium.

The risk will not be located in the UK, and UK IPT will not be due, if the overseas subsidiary is the insured or the insurance is of property against political violence. Premium taxes may then be due in the country where the risk is located.

If the UK company and its overseas subsidiary are both insureds under the contract, the premium should be apportioned between the UK and the overseas jurisdiction.

Global Contracts: A global contract is a contract insuring risks located in more than one country.

The following are examples of political risks global insurance contracts:

- A contract taken out by a company, where the location of the insured determines the location of risk and the definition of “insured” includes other corporate bodies or establishments located in other countries. The contract may refer to specific named entities or may state that all subsidiaries, associated companies, branches, or other forms of establishment are covered under the policy.

- A contract covering property against political violence, where the property is located in more than one country.

Premium Apportionment: A global contract may give rise to regulatory and tax exposures in different jurisdictions. Compliance with these requirements requires the overall premium to be apportioned between the countries in which risks are located. (Link: http://www.lloyds.com/redirect-pages/risk_locator/premium_apportionment)

Product Type Political Risk Insurance
Defined Risks Covered Political Risks: Regulatory
Political Risks: Breach of Contract
Political Risks: Expropriation
Political Risks: Currency Transfer and Convertibility
Political Risks: War and Civil Disturbance
Eligible Form of Investments All
Eligible Currency of Underlying Investment Covered by this Product Both local and foreign currency
Eligible Countries & Regions All
Eligible Applicants All
Eligible Sector No Specific Sector
Maximum Tenor Over 20+ years
Max. Absolute Amount (USD) Over 350+ MM
Max. % of Project Costs Covered 100%
Max. % of Export Content Covered Over 85+%
Fees Market-based
n.a.

Other Conditions Sovereign Counterguarantee: No
Anti-Corruption and Governance Standards: No
Environmental standards: No
Social standards (incl. Human Rights Standards; Labor Rights Standards): No
Others:
Source(s) n.a.
For more information, contact n.a.
Attachments n.a.
Additional Links n.a.
Deals n.a.

Provider Name Lloyds
Institution Type PUBLIC: Multilateral Development Bank
Ownership Corporate and individual members
Head Office One Lime Street London EC3M 7HA
Provider Home Country United Kingdom
Rating n.a.
Main Risk Mitigation Products n.a.
Attachments n.a.
Additional Links www.lloyds.com/lloyds/key-contacts
www.lloyds.com/news-and-insight/risk-insight/reports
www.lloyds.com/the-market
www.lloyds.com/lloyds/offices
Entered On: 02/20/2008 at 11:45 AM
Updated On: 05/20/2013 at 01:00 PM