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Marsh: Growing Demand for Political Risk and Trade Credit Insurance Prompts Increased Use of Public Agencies

Source: Marsh

Posted on 21 May 2012 by Neilson

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Increased volatility in the political risk landscape coupled with lingering effects from the global financial crisis have project developers, investors, exporters, and others turning increasingly to public agencies for political risk and trade credit insurance. Accessing such public bilateral and multilateral agencies (MDBs) and export credit agencies (ECAs) can be an intricate and time-consuming undertaking that requires more specialized expertise than is needed to access private insurance markets.

In response, Marsh has formed a global public agency team comprising senior specialists within its Political Risk and Trade Credit Practice to assist clients in accessing and procuring insurance from MDBs and ECAs around the world. Based in Washington D.C., New York, London, Toronto, Paris, Mumbai, and Singapore, Marsh’s specialists have detailed knowledge of the applications and approval processes as well as understanding of the environmental, social, developmental, and other policy requirements inherent in obtaining public agency coverage.

“The public sector has always been a major provider of political risk and trade credit insurance, but is often overlooked by organizations until the risk landscape worsens and the need for more insurance grows,” said Julie Martin, a senior vice president within Marsh’s Political Risk Practice and leader of the new public agency team. “In some cases, public insurance coverage is the only option for insuring challenging risks—especially those in the most volatile regions of the world.

“The political risk environment remains highly volatile and unpredictable—as highlighted by the recent expropriation events in Argentina and political unrest in the Middle East and North Africa,” Ms. Martin said. “At the same time, the risks of payment defaults and corporate failures due to the lingering global financial crisis continue to fuel demand for more trade credit insurance, and mounting concern over the Euro Zone’s debt crisis is only feeding more demand.”

Although it requires a higher level of engagement on the part of the insured to obtain public insurance coverage compared to the private market, there are benefits to doing so. Because public insurers are driven by broad objectives, including promoting foreign trade or furthering economic development, they tend to offer longer coverage periods and have a higher tolerance for risk than their private sector peers. In some cases, public insurers can also deliver deterrence effects on host governments.

“With Marsh’s new public agency team, we are in a better position to provide seamless advisory services to those wishing to tap the public markets for political risk and trade credit coverage,” Ms. Martin said.