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Last Updated: 12/19/2025

Issue: Political Risk Insurance (PRI)  as a tool for businesses to mitigate and manage risks arising from the adverse actions—or inactions—of governments. As a risk mitigation tool, PRI helps provide a more stable environment for investments into developing countries, and to unlock better access to finance. Political risk may be defined as economic changes arising from events either directly or tangentially related to the political process. of events covered by political risk insurance include government expropriation, war, insurrection, terrorism, sovereign payment default, breach of contract, and specific government action (new laws and/or regulations) that can directly affect a company's operations and interfere with its ability to perform critical functions. While PRI is a type of commercial insurance, it protects businesses and business ventures against that other conventional insurance policies would not normally cover. Due to the unpredictability of many political events, PRI offers businesses the ability to cushion the impact and increase long-term durability, especially when operating in emerging economies.

Overview: Political risk insurance has a long history mainly as a government tool for reducing risks associated with . Recently, PRI has become increasingly important in C-suites and boardrooms as global conflicts, tariffs and trade uncertainty, and economic nationalism . A survey of 66 global businesses by broker Willis Towers Watson (WTW) found that 74% of respondents ranked political risk on the Enterprise Risk Management (ERM) risk register. Additionally, the same survey reported that 2023 saw the highest political risk losses, with 18% of respondents that required corporate earnings restatements. Based on eight years of survey results, the WTW Director of Political Risk Analytics has identified a from highly exposed sectors investing in risking countries to higher potential losses across all sectors with a focus on U.S. policies. 

Modern political risk insurance started taking shape after World War II to promote investment under the . For over forty years, PRI was dominated by bilateral institutions, such as the U.S. Overseas Private Investment Corporation (), owned and operated by national governments for the benefit of their national private capital. Numerous multilateral institutions, such as the World Bank's Multilateral Investment Guarantee Agency (), also participated in the PRI market in the late 1980s. Multilaterals function as financing conduits for regional and sector-specific economic development in their member countries. Their mitigation of political risk comes mainly in the form of guarantees, either partial risk or credit.

While PRI is not exactly new, it has into a fully mature market. Private insurers first appeared in the and became more active after the debt crisis. The private political risk insurance market experienced a dramatic growth in the 1990s, with international investors enjoying a greater abundance of choices in the investment insurance market. Today, private political risk insurers are concentrated primarily in the United Kingdom, United States, and Bermuda, with some of the largest being Zurich Insurance, Lloyd’s, AIG, Chubb, and Euler Hermes. Having a plethora of active insurers in the PRI market creates significant competition, which gives buyers the ability to choose individualized coverage at a less exorbitant price.

Political risk insurers offer a wide variety of products that can be specifically tailored to any investor's needs and can cover the entire range of politically induced risks. Political risk insurance can be obtained through both . Private providers typically offer coverage related to developing and developed countries, and the coinciding risk-events that can occur while conducting business in these places. Most public providers are national export credit agencies (ECAs), which often act as intermediaries between governments and exporters. ECAs may cover both export credit/trade transactions, as well as longer-term investments.

Depending on the risk, coverage can be . Trade risk coverage might last for only 30 days, but for a major infrastructure development it could last several years. Although it should be noted that very few insurers will provide for longer than a 10-year period.