The Political Risk Insurance Center (PRI-Center) was launched by the Multilateral Investment Guarantee Agency (Miga) of the World Bank Group in November 2006. One year on, Miga’s Stephan Dreyhaupt describes progress so far.
On the first anniversary of the PRI-Center (www.pri-center.com), there is little doubt that the world is perceived to have become a riskier place to do business.
A recent report entitled Risk Management in Emerging Markets (2007) by Ernst & Young identifies political risk in emerging markets as the top concern of developed country multinationals. Likewise, the recently published World Investment Prospects to 2011: Foreign Direct Investment and the Challenge of Political Risk (2007) documents widespread concern among corporate executives about rising political risk, especially in the energy sector.
In the backdrop of these developments, the PRI-Center has emerged as an important information provider and disseminator, a free, user-friendly online service aimed at all actors of the political risk insurance ‘industry”, as well as cross-border investors. As a member of the World Bank Group, the Multilateral Investment Guarantee Agency (Miga) – itself an issuer of political risk insurance, but also with a broader mandate to promote foreign direct investment into developing countries – has been uniquely positioned to bring to life this service.
Feeling the need
The genesis of the PRI-Center came in response to an expressed need (PRI Information Survey 2006) for a single source of information on political risk management and insurance – a ‘public good’s in the niche world of political risk.
In the course of the year since the site has been up and running, the PRI-Center has featured a variety of topical issues, reflecting different perspectives and viewpoints, while also posting some 1,000 articles and research findings, tools and case studies on political risk environments, legal issues and tools for risk mitigation.
While some of this information has been more specialised, and therefore has had a narrower audience, most has received widespread attention by the multifaceted users of the site.
Of particular interest to the investor community are the country profiles, which present at-a-glance ratings (sovereign and political risk) from selected key rating agencies, the latest relevant news and other information resources directly applicable to the country in question. Also, of interest to investors are the directories of providers of political risk insurance and re-insurers, brokers and companies/organisations with legal, financial and advisory capacities on political risk – all of whom comprise the political risk insurance industry.
In its aim to service the political risk insurance industry, one of the target audiences, the PRI-Center has disseminated some 40 newsletters of political risk management and insurance practitioners, and regularly posts key press releases by them. An events section offers regular updates of the industry’s main upcoming events.
Partner pages present an opportunity for many practitioners to feature their own services and knowledge. At the same time, it has engaged players from many different facets of the political risk community, disseminating their views and messages to broader audiences.
To the broader public, the PRI-Center has emerged as an educator of the importance of addressing political risk in investment decision-making, offering a basic guide to political risk and mitigation practices, as well as a glossary of key terms.
Perhaps the most important contribution of the PRI-Center has been its publication of features, which pull together under a single theme the different experiences, perspectives, analysis of the contributing organisations or individuals. This part of the PRI-Center manifests the community building character of the site, as well as its leadership in identifying current themes that reflect the diverse interests of its users.
All in threes
Over the past year, the PRI-Center has explored three themes and has focused on three regions, drawing on contributions by Berne Union members, brokerage and consultancy firms, law firms, research institutions and others.
At launch, PRI-Center presented different views on terrorism and political risk insurance, with contributions from BPL Global, the JLT Group and Control Risk. Turning in the subsequent feature to a legal issue, investment claims, PRI-Center examined the rise in investor-state disputes, with a contribution from the Overseas Private Investment Corporation (Opic) highlighting its own claims history and recent experiences.
Following that, the focus fell on the extractive industries and the rise in resource nationalism, with a contribution by Export Development Canada (EDC) addressing that topic.
In terms of regional focus, the PRI-Center first looked at the changing investment environment in the Middle East and North Africa region, highlighting their differences in terms of both perceptions of risk and political risk mitigation products/services offered, addressing specifically shariah-compliance and takaful providers.
The increasing role of the state in business affairs and the growing risk of expropriation were the principal issues addressed in the Latin America focus.
A different picture was painted for Sub-Saharan Africa, where new opportunities are emerging alongside challenges, and where the private sector is engaging in collection actions to improve the investment climate and reduce political risk.
The upcoming feature of the site will address south-south investments (investments between developing countries) and political risk insurance. South-south investments are becoming increasingly important in today’s foreign direct investment landscape, accounting for a bigger share of global flows.
However, the private insurance market in many emerging markets is frequently not sufficiently developed and national export credit agencies often lack the ability and capacity to offer political risk insurance products.
The feature will present survey findings from the perspectives of both south-based investors and south-based public political risk insurance providers and private providers offering such insurance to south-based investors. The feature will also showcase case studies of political risk insurance providers for key south-south investing countries.
The Political Risk Insurance Center (PRI-Center) was launched by the Multilateral Investment Guarantee Agency of the World Bank Group in November 2006.