Businesses and insurance商业与保险How to become politics-proof政治风险，如何能抗
Businesses can get cover against some, but not all, political upheavals
REGIME change has an awkward way of turning useful political contacts into liabilities. Just ask Ahmed Ezz, an Egyptian steel magnate and friend of Gamal Mubarak, son of the country’s ousted president, when you next visit his jail cell. But businesses face political risk even in the absence of the kind of turmoil rocking the Middle East. Governments nationalise assets: in recent years, Congo has taken several mines from their private owners. They change the rules unexpectedly, making it harder to do business, as Research in Motion, the maker of the BlackBerry, found when some governments demanded access to users’ messages. They can enforce the law in the most draconian fashion against firms that displease them, as Russia’s Yukos found.
A survey last year by the World Bank’s Multilateral Investment Guarantee Agency (MIGA) found that political risk was the biggest deterrent for investors in developing countries over the longer term, ranked ahead of economic instability and bad infrastructure. What can they do about it?
Private insurers, national export-credit agencies and multilateral bodies like MIGA offer businesses cover against political shocks. But which firms they will insure, and on what terms, varies. National agencies, such as America’s Overseas Private Investment Corporation, tend to sell cover only to companies from their home country. Private insurers can be more risk-averse than multilateral agencies.
Not all risks are insurable. Cover is available for the sudden imposition of currency controls, expropriations, conflicts and terrorism, and for governments failing to keep their part of an investment deal, such as supplying a new factory with electricity. But legitimate policy changes (tax rises, say, or stricter environmental rules) cannot be covered, because of the insurer’s slim chances of recovering anything from the government concerned.
The demand for political-risk insurance slumped during the financial crisis, as companies made fewer investments. Members of the Berne Union, the largest group of providers of such cover, wrote only $36 billion of new policies in 2009, down 38% on the previous year. But business rebounded sharply in 2010 when foreign investment into developing countries recovered. As regimes totter across the Middle East, those who offer cover against nasty political surprises look set to be even busier this year.