French companies turn to political risk insurance but prices up 30%

French companies have considerable exposure to African markets, both as exporters and investors. It is estimated that about 3,000 firms have business operations in the north of Africa, with investments worth around €30bn. They include some of the most revered names of France's industrial and financial world. The sharp and somewhat surprising downfall of governments in places like Tunisia and Egypt has highlighted the need to purchase proper insurance coverage for operations in such territories, experts say. “We have been clearly seeing an increase of demand since the start of the revolutions in North Africa”, said Alexandre Egnell, responsible for underwriting trade credit and political risk at Liberty International Underwriters in Paris. “They are consulting us mainly about countries that have gone through revolts, like Libya and Egypt. But exporters and investors are also worried about the contagion effect and have been asking about countries that are less under the spotlight, like Qatar and Saudi Arabia.”hide“French companies are increasingly trying to secure their investments and contracts in tricky countries,” agreed Jean-Luc Debièvre, the director of political risks at brokers Gras Savoye. He remarked that insurers are certainly very cautious when underwriting risks in the most affected countries, but that it is still possible to find some coverage even in the most dangerous places. “If you think of the destruction of local assets due to political violence, the answer today would be no in a country like Libya,” he said. “But if you want to insure a commercial contract in that country, you could have a chance, if you made a very solid case to an underwriter.” Mr Egnell points out that French companies have traditionally traded in North Africa and the Middle East, especially in business linked to the public sector. The toppling of governments by popular revolts could therefore bring them considerable problems in terms of breaches of contracts and even the expropriation of assets. In particular, those companies that are trying to buy coverage for the first time could have a hard time, he added. Especially in the countries most affected by the events of the past two months. “Of course exporters have more difficulty finding insurance capacity for operations in countries such as Libya, Egypt or the Ivory Coast. And in other countries of the region, we have seen an increase in premium prices of between 15% and 30%,” said Mr Egnell. Mr Debièvre noted that the biggest hurdle for buyers is to find underwriters with an appetite to take their risks in certain hot spots. “The question of price is not their first priority today,” he pointed out. Mr Debièvre also says that the fear of a contagion effect in other parts of the region has not completely affected the eagerness of insurers to sell political risks coverage in places like Morocco or Algeria—where French companies also have plenty of interests. “I would not say that companies will not have problems trying to find coverage there, but it is certainly much easier to place a risk in Algeria than in Libya.” Mr Egnell also sees a silver lining for the insurance market arising from the recent turmoil. “The situation is difficult right now for exporters, investors and even for us, insurers. But the good news is that these events will increase the perception of political risks among companies. They are not theoretical risks, but real ones, and they have to be transferred,” he concluded.

French companies turn to political risk insurance but prices up 30%

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