Political Risk and Trade Insurance

Ver­ti­cal Opti­miza­tion assists com­pa­nies to secure insur­ance cov­er­age which in many instances reduces the risk expo­sure to a lender in a given trans­ac­tion and thus makes it eas­ier for them to extend credit facilities. Polit­i­cal risk insur­ance and export credit guar­an­tees address two sep­a­rate but related prob­lems in a trans­ac­tion. Typ­i­cally the loan guar­an­tee under­pins the invest­ment and reas­sures the lender going into the ven­ture about the cer­tainty of repay­ment, while polit­i­cal risk insur­ance typ­i­cally pro­tects the entre­pre­neur or equity holder and pro­tects them against fail­ure in the course of the ven­ture as a result of vio­la­tions of inter­na­tional law.

OPIC Polit­i­cal Risk Insurance

When poten­tial investors (such as lenders) are con­cerned about the effects of polit­i­cal insta­bil­ity on your over­seas invest­ment, polit­i­cal risk insur­ance can help pro­tect the invest­ment. The Over­seas Pri­vate Invest­ment Cor­po­ra­tion (OPIC) pro­vides var­i­ous poli­cies to insure against prop­erty and income loss due to polit­i­cal vio­lence, expro­pri­a­tion, ter­ror­ism, and cur­rency incon­vert­ibil­ity, depend­ing on the type of coverage.

Ver­ti­cal Opti­miza­tion, LLC is an OPIC orig­i­na­tor for polit­i­cal risk insurance.

Appli­ca­tions for polit­i­cal risk insur­ance are often filed before or simul­ta­ne­ously with loan appli­ca­tions. The prin­ci­pal areas cov­ered by OPIC PRI include Polit­i­cal Vio­lence, Expro­pri­a­tion, Stand­alone Ter­ror­ism, and Cur­rency Incon­vert­ibil­ity. OPIC also has a pro­gram tar­geted to small busi­nesses includ­ing exporters and firms involved in the oil-​and-​gas and non-​oil and gas sec­tors. As an orig­i­na­tor for PRI, Ver­ti­cal Opti­miza­tion can assist com­pa­nies eval­u­ate their needs and process the appli­ca­tions. OPIC PRI does NOT require an OPIC loan appli­ca­tion to be con­sid­ered. In many cases, com­pa­nies may obtain PRI cov­er­age from OPIC while the financ­ing is obtained from a dif­fer­ent source.

Ex-​Im Bank Export Credit Insurance

While OPIC PRI tends to focus on “project finance”, EXIM tends to focus on “trade finance”. Clearly there is NOT a divid­ing line between these two since many invest­ments over­lap the two areas of inter­est. As an exporter of goods, you want to be sure you’ll get paid for the prod­ucts you sell. Accept­ing an unin­sured order from another coun­try may prove to be a nerve-​wracking ordeal, or sim­ply too risky for your export finance lender. Com­mer­cial and polit­i­cal risk insur­ance mit­i­gates the risk asso­ci­ated with export­ing to for­eign com­pa­nies and gov­ern­ments. EXIM Bank offers export credit insur­ance to ensure exports against con­tract vio­la­tions in an inter­na­tional trans­ac­tion. The prin­ci­pal details include:

Insur­ance cov­ers losses due to:

  • Com­mer­cial rea­sons (such as insol­vency or default) and
  • Polit­i­cal events (such as war, for­eign exchange incon­vert­ibil­ity, etc.)

Insur­ance covers:

  • 100% of pay­ments from sov­er­eign buyers
  • 90% of pay­ments from pri­vate sec­tor buyers
  • 95% of let­ter of credit transactions
  • 98% of bulk agri­cul­tural transactions

Cov­er­age does not include con­firmed let­ters of credit, cash-​in-​advance sales, and cer­tain mil­i­tary and defense-​related items.

  • Export prod­ucts must include 51% or more U.S. con­tent (includ­ing labor, with­out markup).
  • Cov­er­age is applic­a­ble to repay­ment terms up to 180 days (depend­ing on the prod­uct), or up to 360 days for cer­tain qual­i­fy­ing transactions.

To obtain more infor­ma­tion and to assure your prof­its when export­ing abroad, call us at 1−202−370−6165 or send us an email.