Multinationals are discovering that insurers aren’t offering products to protect from financial loss in that country.
As Iraq suffers from deepening insurgency, it is becoming increasingly difficult for multinational corporations to be able to find the business insurance coverage that they need to be able to protect themselves from the potential financial losses that they face from doing business in that country.
It has reached the point that “political risk” insurance is nearly impossible to purchase.
Without that form of business insurance, companies wouldn’t have any protection against having their property damaged as a result of acts of violence, nationalized by a foreign government, or experiencing other circumstances that could lead to considerable financial losses. That said, it is still possible to purchase policies to protect against extortion and kidnapping, though buying it is becoming increasingly expensive.
The business insurance market is already a relatively limited marketplace, but it is shrinking even further.
According to the Marsh & McLennan U.S. practice leader for political risk, Stephen Kay, “The already limited market for Iraq coverage has for all intents dried up, in light of recent events.” He added that if a company was to try to obtain “a large political risk insurance limit” in order to be able to cover a $40 million power plant, Kay said that the odds of being able to actually purchase that coverage at the moment would be next to impossible “regardless of price.”
Large companies and policymakers, alike, are seeking to be able to take advantage of the massive opportunity being presented by the billions that are currently being spent on the country’s rebuilding efforts. However, they are finding themselves facing one road block after the next as the insurgents advance more rapidly and as coverage against the potential damage that could be caused has suddenly disappeared.
The insurgent group, the Islamic State for Iraq and Syria (also known as ISIL, depending on which translation is used), has caused any form of that business insurance availability to simply dry up. The American government is now discouraging travelers from going to Iraq and has cautioned citizens who are currently within the country to be ready for an evacuation at very little warning.