Political Risk Insurance For Trade Finance

Political Risk Insurance for trade finance offers achievable solutions to many of the risk management complications involved in international trade. International trade with emerging markets entices with promises of exceptional margins and high rates of return. Admittedly appealing prospects. The growth of international trade has continued unabated for decades and is now approaching $20 trillion per year. The political class in developed nations worldwide fully support globalization and western democracies are marching inexorably towards globalism.

But, while cross-border trade with developing countries is socially and politically encouraged, it is still unpredictable and fraught with risk beyond what can be controlled by importers, exporters, or trade financiers. Political risk in emerging markets can still give even the most sophisticated importers and trade finance providers pause while excessive political risk can make trade finance unavailable for some transactions.

When visualizing these risks, picture government officials who look like Claude Rains visiting a shipping terminal and confiscating the goods you purchased because he is shocked, shocked I tell you, that some activity or another is going on there. Global Trade Funding can help protect your potentially exceptional margins from excessive risk with Political Risk Insurance for trade finance.

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Election of Coverage

Political Risk Insurance for trade coverage elections for most equity and shareholder debt investments are based on a coverage ceiling and an active amount. The coverage ceiling represents the maximum amount of insurance available for the insured project and future earnings under an insurance contract.

Premiums are calculated based on the active amount, which represents the insurance actually in force, from time to time, during any contract period. The active amount of all coverage must equal the book value of the insured investment at a minimum unless a lower coverage ceiling is elected. There is no charge for the difference between the coverage ceiling and the active amount.

For investment types other than equity and debt investments, premiums are computed based on the maximum insured amount, the current insured amount and a standby amount. Maximum insured amount represents the maximum insurance available for the insured investment under an insurance contract. Current insured amount represents the insurance actually in force during any contract period. The difference between the two is the standby amount. Separate premiums are charged for the current insured amount and standby amounts. For loans, premiums are charged on the covered amount, the amount of disbursed principal plus accrued interest, less principal paid to date, and a standby fee is charged for un-disbursed principal.

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We offer a range of very competitive trade finance options to fund imports, exports and commodities along with unparalleled underwriting expertise and unsurpassed deal structuring advisory services.

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