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Political Risk

To identify the territory of regulation and tax of a political risk, consider:

  1. The nature of the cover provided;
  2. The physical location of insured property; and
  3. The location of the insured’s residence or business establishment.

Consequential financial loss
Political violence
Confiscation of property
Inconvertibility of currency
Non-repossession of aircraft
Trading risks
Kidnap and ransom

Consequential financial loss

Consequential financial loss insurance provides cover for miscellaneous financial losses incurred by the insured as a result of political actions affecting their interests. 

The risk location is the territory in which the insured’s business establishment is located.

If the contract covers more than one business establishment, situated in different territories, each business establishment will create a separate risk location.

Political violence

Political violence insurance provides cover for physical damage to property as a result of political risks and any consequential financial loss.

  • Fixed property

    The risk location for immovable property is determined by the territory in which the property is situated. If the property is situated in more than one territory, then there may be multiple risk locations.

    Please note: In some territories, e.g. Canada and the US, the location of the insured’s residence or business establishment creates a risk location irrespective of the physical location of the insured property. Consequently, if the insured property is in a different territory from the insured’s residence or business establishment, there are two territories for regulation and tax.

  • Moveable property

    In most territories, the risk location is where the moveable property is normally situated.

    The main exception to this rule is in the EEA where the regulatory risk location for moveable property is the territory where the insured is resident but the tax risk location remains the location of the moveable property.

    If the contract covers moveable property situated in more than one territory there may be multiple risk locations.

    Where the moveable property’s location is uncertain or variable, the risk location is the territory in which the insured’s residence or business establishment is located.

    Please note: In some territories, e.g. Canada and the US, the location of the insured’s residence or business establishment creates a risk location irrespective of the physical location of the insured property. Consequently, if the insured property is in a different territory from the insured’s residence or business establishment, there are two territories for regulation and tax.

Confiscation of property

Confiscation insurance covers losses arising from property confiscated as a result of political action and any consequential financial loss.

The risk location is determined in the same manner as the associated property.

If the property is situated in more than one territory there may be multiple risk locations.

Inconvertibility of currency

Inconvertibility of currency insurance provides cover for the financial loss incurred by the insured when it cannot convert local currency or repatriate funds out of a territory.

The risk location is the territory in which the insured is resident or its business establishment is situated.

If the contract covers more than one business establishment, situated in different territories, each business establishment will create a separate risk location.

Non-repossession of aircraft

Non-repossession of aircraft insurance provides cover for the interest of a lender that has provided lease finance on an aircraft in the event that the lessee defaults under the loan and the aircraft cannot be repossessed, deregistered and resold in the currency of outstanding debt.

Where the policy is written in relation to a specified aircraft the risk location is determined in the same manner as aircraft hull.

Where the aircraft is not specified the risk location is the territory in which the insured’s business establishment is located.

Trading risks

Trading risks insurance provides cover for financial losses incurred by the insured that relate to trade risks, i.e. import/export embargoes and non-delivery of pre-paid goods.

The risk location is the territory in which the insured’s business establishment is located.

If the contract covers more than one business establishment, situated in different territories, each business establishment will create a separate risk location.

Kidnap and ransom

Kidnap and ransom insurance provides cover against kidnap, hijack and bodily injury. It may be taken out by individuals, to provide personal protection for themselves or family members or by corporate entities to protect employees. 

The risk location is usually the territory in which the person or corporate entity taking out the insurance is resident or its business establishment is located.

Risk locator tool

Establish the location of your risk

Contacts

Lloyd's International Trading Advice (LITA)
+44 (0)20 7327 6677