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PRI: Putting the MENA unrest in context
22 March 2011
Trade Finance and the New York City Bar Association hosted a seminar on credit and political risk insurance in February. Oliver O'Connell spoke with Roderick Smith of Clyde & Co, and Frederick Jenney of Morrison & Foerster, about the effect on the insurance market of the turmoil gripping the Middle East and North Africa.
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Political risk insurance
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Trade Finance (TF): With the unrest in the Middle East and North Africa (MENA) continuing, from a political risk insurance perspective, what have past crises taught us?
Frederick Jenney (FJ): What is interesting about political risk coverage is that it works best in the middle band of countries rather than at the extremes. There are perceived ‘safe’ countries such as many of the developed economies. (And note that perceived safe countries include Iran in 1978 before the revolution – it’s not the reality but the perception that counts.) Then there are extreme countries, such as Somalia, where no-one really does business and where no insurer would offer coverage anyway. Then in the middle there are perceived risky countries that still attract investment. That is what the political risk insurance industry is there for – countries that are open to investment but that are perceived as having some underlying problems.
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