What Is Political Risk Insurance?

Political risk insurance is a type of insurance policy that can be purchased by companies in order to protect themselves against lost profits as a result of certain political factors. With this type of insurance, you can protect your business from the possibility of several circumstances that could cause loss. This type of insurance can protect against revolution, government confiscation, business interruption, and several other scenarios.

Hostile Country

For example, if you have a business and the government of the country in which you do business is overthrown, this could have a significant impact on the viability of your business. You can purchase political risk insurance to mitigate against this risk. This will provide you with a lump sum payment if it is determined that the actions of the government with a political system in which you reside had a negative effect on your business.

Company Interests

Typically this type of insurance policy is sold by insurance companies that have businesses outside of the country. If the insurance company resided in the same country as the political system that it was insuring against, this could create a situation in which the insurance company would be negatively affected by political factors as well. 

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