Political Risk Insurance an introduction Alan Franklin GBRM

Political Risk Insurance: an introduction Alan Franklin GBRM January 31, 2017 AON Vancouver, BC, Canada

Understanding risks is a prerequisite PRI covers many risks related to international investment

10 Categories of risk that can be covered 1. Risks of a legal nature emanating from the host state actions 2. Risks from the host state of actions that are not the result of laws or orders 3. Risks of a legal nature emanating from the failure of the host state to properly act

10 Categories of risk that can be covered 4. Risks of a legal nature emanating from the home state or international community 5. Risks of violence that are not controlled by the host state

10 Categories of risk that can be covered 6. Economic risks such as strikes, work stoppages 7. Breach of contract by the host state 8. Failure by the host state to pay on sovereign obligations

10 Categories of risk that can be covered 9. Failure of the host state to pay an arbitration award 10. State succession issues – State A issues a mining licence. State B takes over control of that territory of State A and State B does not recognize the actions of State A

Categories of risk that can be covered • The risks in category 1 can be subdivided into illegal acts of the host state and legal ones • Illegal generally means that they are against international law, particularly as set out in an international treaty, such as a bilateral investment treaty. • This may matter to insurers

Categories of risk that can be covered Protection of assets - factories, mines, power projects Protection of investors – their right to transfer funds out of the country, or hold their shares

Risk must be international • a Canadian company doing business in Canada cannot obtain PRI but • a Canadian company sets up a US sub for a Canadian project now has an international component

Issuers of PRI Insurance • Commercial insurance companies are the largest group of PRI insurers • Export Credit Agencies such as Export Development Canada, Ex-Im US • Multilateral Agencies with development goals such as MIGA of World Bank, African Development Bank Inter-American Development Bank • National Agencies with development goals eg OPIC in the US

QUESTIONS? Contact information: Alan Franklin Global Business Risk Management alanfranklin@gbrm. ca www. gbrm. ca