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The changing shape of political risks insurance

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The changing shape of political risks insurance

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    1. The changing shape of political risks insurance

    2. BPL Global – Emerging Market Risk Insurance broker specialising in Emerging Market Risk Political Risk Insurance (PRI) Trade Credit Insurance Terrorism and Political Violence Insurance Founded 1983 Based in London and Paris Independent, employee owned International client base: major corporations and financial institutions Global Partners: USA Italy Austria Brazil Chile

    3. PRI Market – Product Overview Non-Payment Insurance: Special Risks Sovereign / Government Buyers / Obligors Single Risk / Medium Term Emerging Market Private Buyers Equity Form PRI: Investment Insurance Lenders PRI Property Based PRI: Terrorism, Political Violence etc covers

    4. Overview Period ECAs and the Private Market Basel II & product innovation Pricing

    6. ECAs and the Private Market The “market gap” ECAs as facilitators, packagers and syndicators Co-operation and competition

    7. Basel II - Overview Basel II will impact trade and commodity finance in emerging markets adversely Comprehensive non-payment insurance policies can qualify as Credit Risk Mitigation (CRM) under Basel II

    8. Background to Basel II Regulators catching up with industry practice New forms of “guarantees” Unfunded Risk Participations Credit Default Swaps “….a wider range of credit risk mitigants (CRM)….” June 2004 Framework: para. 110 Non-payment insurance policies are an acceptable “guarantee” under Basel II, subject to them meeting the operational requirements FAQ #6, BIS website, Oct.2002

    9. Basel II CRM – 2 key points All conditions within direct control of the Bank an “unconditional guarantee” can have conditions The bank must control “residual risks” “…it is imperative that banks employ robust procedures and processes to control [residual] risks” June 2004 Framework, Para. 115 re “Overarching issues of CRM”

    10. BPL Global & Basel II Product Non-payment insurance policies can meet the criteria for Basel II compliant CRM Process BPL Global helps Bank clients control the “residual risk” Proof BPL Global’s claims statistics show that our non-payment insurance works

    11. BPL Global Claims Experience - Non-Payment Insurance works!

    12. Non-Payment Insurance - Improvements Conditions Within direct control of Policyholder Removal of traditional exclusions E.g 5 Great Powers War Exclusion Lloyd’s March 2007 new regulations Shorter Waiting Periods Clear claims procedures and timetables

    13. …but it's still insurance Principle of Indemnity Utmost Good Faith Proving a Loss vs. Pay first argue later

    14. PRI Market – Final Thoughts Non-Payment Insurance: Special Risks Sovereign / Government Buyers / Obligors Single Risk / Medium Term Emerging Market Private Buyers Equity Form PRI: Investment Insurance Lenders PRI Property Based PRI: Terrorism, Political Violence etc covers

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