Infrastructure firms buying political risk covers

Infrastructure contracts in Sub-Saharan Africa are driving take-up of political risk insurance, Maxime Hayes, political risk underwriter, Beazley France told StrategicRISK.

Contract frustration is the biggest source of demand among French buyers of political risk covers, particularly banks and exporters, Hayes suggested.

“These infrastructure transactions are mostly with African countries. Among buyers in France we are for the most part talking about Francophone countries. We see particular demand from infrastructure projects in Senegal, and also in Ivory Coast, Benin and Togo,” said Hayes.

Banks offering loans to African government ministries or state-run companies are looking for insurance to cover repayment of those debts. On the other hand, infrastructure providers seek insurance for contracts with African firms and governments. “The very big demand is for infrastructure in Sub-Saharan Africa,” said Hayes.

While government-led economic projects are one source of change, political instability has also fuelled enquiries, he suggests.

“In Zimbabwe there was a coup in November. Such events are a driver for buying insurance. Demand for democracy means that circumstances can change very fast.

“In Tunisia there was the 2011 revolution. Tunisia is the only country to have managed a democratic transition from the Arab Spring, however such transitions can still change very quickly,” said Hayes.

Terrorism covers have changed in recent years, with a broader range of protection on offer, such as for business interruption. Businesses can face revenue losses even if they are not physically struck by an attack.