Political Risk Insurance In India - Dire Need In The Global Context

Prologue: The Indian financial market witnessed exciting twists and turns throughout 2019 due to events from all fronts, political, economic, social and corporate, both global and domestic.

- Anabil Bhattacharya

Indian market started the year with high hopes then saw really miserable levels in middle of the year as economic growth fell to new lows. But at the same time in the current results during the Q1 & 2 of FY2019-20, on consolidated basis, we find that the key growth came from the export-driven industries such as information technology, pharmaceuticals, although there is tremendous recession in automobiles and metals but obviously there is a definite growing global presence of India in the international market - that brings the danger of a greater exposure to political risk by the Indian Companies working abroad. Precisely that aspect prompted me to come forward to start a discussion on various facets of Political risks.

What is Political Risk?

Basically the political risks are the inherent, intangible risks being faced by the firms who are doing business internationally, arising from the action(s), or inaction(s), of: 1. The Insured's Government; or,

2. A foreign Government or Government entity; or,

3. A third party country which deprive a company of all or part of its assets; or prevent or restrict the performance of any contract.

War, riots, coups, embargoes-the sort of political upheaval that once occupied statesmen, mercenaries and spies is these days also the concern of less swashbuckling figures in the world of finance. A band of corporate-risk officers, export managers and international bankers are looking to insurers to shield them from the financial consequences of political turmoil around the world. Political risk cover would once have appealed only to the most intrepid enterprises: oil firms prospecting in the Niger Delta, or mining operations in dodgy corners of central Asia.