Given the current political unrest in Egypt and elsewhere in the Middle East, American companies may find that the security of their overseas investments is under siege. However, many of these companies have purchased political risk insurance which may protect the integrity of their investments. Such specialized insurance is provided by the Overseas Private Investment Corporation (OPIC), the Multilateral Investment Guarantee Agency (MIGA), which is affiliated with the World Bank, and private insurance companies. If you are a company with investments in Egypt or any other country currently experiencing political upheaval, you should consult your political risk insurance coverage in order to determine whether and to what extent you are covered for losses you may be incurring due to events abroad.
Typical political risk insurance policies may cover currency inconvertibility, expropriation, political violence, and/or other losses:
- Currency inconvertibility is the deterioration in the investor’s ability to convert profits, debt service or other investment returns from local currency into U.S. dollars, or to transfer U.S. dollars out of the host country.
- Expropriation is the loss of an investment due to expropriation, nationalization, or confiscation by the host government.
- Political violence is the loss of assets or income due to war, revolution, insurrection, or politicallymotivated civil strife, terrorism, or sabotage. There are two types of political violence coverage— business income coverage and assets coverage. Business income coverage protects the investor’s share of income losses resulting from damage to or loss of use of the assets of the foreign enterprise caused by political violence. Assets coverage compensates for loss of or damage to tangible property caused by political violence.
If you have losses that are potentially covered by a political risk insurance policy, you should act quickly to protect your rights. Among other requirements, an insured must timely file an application for compensation, as well as provide any additional supporting information as may be required by the insurer. Many political risk insurance policies have strict deadlines in which to file a claim (e.g., the standard OPIC policy requires an insured to apply for expropriation or political violence compensation within six months of the loss), so the time to act is now. Moreover, at some point during the claims process, you may need to litigate or arbitrate with your insurer. You will want to secure experienced legal counsel to ensure you receive all the coverage to which you may be entitled.