As appeared in ProjectFinance
ProjectFinance recently examined the growing demands placed upon insurers of public and private political risk.
According to Kaye Scholer Energy & Infrastruture Partner Joel Moser, “There will always be unforeseen risks, and portfolios have to be diversified to minimize the impact of these risks.”
“The allocation of political risks such as expropriation and breach of contract have traditionally been assigned to public agencies such as the World Bank Group, export credit agencies and other development finance institutions,” Moser added. “But there is a growing suite of products available on the private market. Insurers are increasingly able to offer bespoke products that only insure against specific risks that sponsors want to see covered.”
Moser concluded: “Simpler project payment structures, not to mention front-loading payback periods on infrastructure concessions, might allow for private insurers to take a larger share of primary business and encourage greater cross-border flows into emerging markets – without requiring complex collections of diverse credit enhancements. Simple is better for investors. You get a wider audience.”