Political risk insurance and the return of investors

The question a foreign board asks before approving an investment here is not whether there is risk. It is whether the risk can be transferred, and to whom.

What political risk cover actually protects

Expropriation, in the broad sense including creeping measures that deprive an investor of control.

Currency inconvertibility and transfer restriction: earning profit and being unable to move it out.

Breach of contract by a state entity, where the investor cannot obtain enforcement.

And war and civil disturbance damage to assets, which is the category that matters most here and which is the hardest to write.

Who provides it

The multilateral agencies, which have a mandate to support investment in difficult markets and can take risk that commercial insurers will not.

National development finance institutions from investors' home countries, which support their own companies investing abroad.

Export credit agencies, for transactions with an export component.

And a domestic war risk scheme, developed to cover assets inside the country where international capacity was thin.

What it costs and what it unlocks

A premium, which is a real operating expense and which must be priced into the return calculation from the start.

What it unlocks is a board approval. An investment committee that cannot approve unhedged exposure to a specific risk can frequently approve the same investment with cover attached, and that conversion from no to yes is the entire product.

The practical advice

Ask about cover before structuring the deal, not after. Some instruments require the investment not to have been made yet, and a company that closes first discovers it has excluded itself.

What an investor wants is not for the risk to disappear but for somebody to price it — that sentence also summarises my own decisions. A risk that can be insured is no longer an uncertainty but a cost line, and cost lines can be budgeted. The fastest way to bring capital into Ukraine is not to improve the conditions but to make the existing conditions priceable.