What is Political and Credit Risk Insurance

Political Risk Insurance (PRI) is typically used by companies investing in, or banks lending to, projects or assets in emerging market countries where the project credit risk is acceptable but the sovereign risk is uncertain. In its simplest form, PRI is the solution to cover the risks of:

  • expropriation, confiscation or nationalisation of a project or asset by the host country;
  • non-transfer of foreign exchange or currency inconvertibility; and
  • terrorism, war, civil strife and other forms of political violence.

PRI can be extended to cover additional perils:

  • for industries such as mining, a PRI policy can also cover the risks of forced abandonment, forced divestiture, embargo, export licence cancellation, operating licence cancellation, blockade and selective discrimination; and
  • if a foreign government has agreed to pay for the output of a project, supply goods or services, or guarantee the contractual obligations of a government agency, PRI coverage can be extended to cover the risk of non-payment or breach of guarantee.
  • Credit Risk Insurance (CRI) is often used to help banks or companies reduce its lending commitments, or manage the receivables or the credit extended to the customers. It provides protection against the risk of a payment default by the borrower or (if the loan or obligation is guaranteed) by the guarantor. Although not usually available for unsecured corporate lending, CRI is widely used to provide "single-situation" cover for secured loans (whether structured trade finance, asset finance or project finance). Besides cross-border loans and investments, CRI can also cover domestic credit exposure.

 

How Political and Credit Risk Insurance can help you

We believe a good example is worth a thousand words. Here are four cases which we have placed:

  • We provided a syndicate of international banks with a comprehensive PRI policy to support a project finance loan for a mining and minerals export project in sub-Sahara Africa.
  • We placed a long-term PRI policy including cover for non-payment under the government's guarantee for a European leader to a power plant project in Asia.
  • We acted for an international bank syndicating a term financing for a borrower from Mongolia and were able to place a third of the loan in the private insurance market by means of CRI.
  • We assisted a bank to mitigate its counterparty limit on a new project finance loan to a China borrower by arranging a CRI policy to cover half the loan amount for its full tenor.

Enterprise Singapore Political Risk Insurance Scheme (PRIS) – ACCESS TO 50% PREMIUM SUPPORT

PRIS is a financial assistance programme under Enterprise Singapore’s Global Company Partnership (GCP) programme. It enables qualifying Singapore companies to receive 50% premium support for up to the first 3 years of each PRI policy. This is subject to a maximum amount of S$500,000 per qualifying Singapore-based company.

 

What is Credit Risk Insurance

Trade Credit Insurance is a credit risk management instrument to protect against non-payment from your buyers. It supports your business by:

  • Protecting your company against bad debts
  • Providing cash flow and profit protection as a sale is not a sale until full payment is received
  • Strengthening your credit control management
  • Providing an early warning system via insurer’s continuous monitoring and assessment of your buyers’ risks
  • Helping your company obtain more attractive bank financing and credits from suppliers
  • Allowing you to offer open credit term instead of letters of credit
  • Giving you the confidence to sell to new markets and to new buyers
 

Enterprise Singapore Trade Credit Insurance Scheme (TCIS) – ACCESS TO 50% PREMIUM SUPPORT

TCIS is a financial assistance programme by Enterprise Singapore, under their Global Company Partnership (GCP) arrangement. It enables qualifying Singapore companies to receive support of up to 50% of the minimum premium for a TCI policy held with Singapore-registered credit insurers. This is subject to a maximum amount of S$100,000 per qualifying Singapore-based company.

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Market Expertise

Today, Lockton Surety is one of the largest surety brokers in the world. You benefit from our global expertise and local knowledge.

 

Lockton Service Structure

Lockton Surety operates as a service center, not a profit center. Our group is driven by client satisfaction and retention. Accordingly, our focus is consistently guided by the continual addition and improvement of the services we offer to help make your business better.

Key Contact - Singapore

Eve Lau
Senior Director
+65 6326 9235
Eve.Lau@asia.lockton.com

Monica Bay
Director
+65 6326 9295
Monica.Bay@asia.lockton.com

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Read more in the Lockton Newsroom