18.9.10 Political Risks
These include:
• War
• Civil Commotion
• Currency Convertibility
• Government Default
It is logical that the political risks be allocated to the host government. None of the
above factors is within the private sector’s control. It is also fair that both investors
and lenders request protection against such risks, in the form of some insurance.
Political risk insurance will usually include cover any breach on the part of the host
government relative to specific undertakings agreed upon in the BOT agreement.
18.9.11 Political Risk Insurance
This insurance is usually provided by either the lenders or investors own export
credit agencies or by the World Bank’s newly created agency known as “Multilateral
Investment Guarantee Agency” (MIGA) (See also Chap. 17, or still the U.K’s
department known as “Export Credit Guarantee Department” –ECGD).
In actual practice, the mechanism of this insurance may not be easily
implementable because these agencies will in turn require additional assurances
from the host government.
18.9.12 Force Majeure
“Force Majeure” refers to those risks, albeit small, which cannot reasonably be
insured against.
Commercial banks and investors will not be willing to assume these risks in a
BOT project, and they will seek support from the host government.
A typical “Force Majeure” event is for example, the invasion of the host country
by an invader.
It is logical that it is the host government’s responsibility to provide some
reasonable coverage for uninsurable force majeure events.
18.9 Analysis of BOT Project Risks
523
These include:
• War
• Civil Commotion
• Currency Convertibility
• Government Default
It is logical that the political risks be allocated to the host government. None of the
above factors is within the private sector’s control. It is also fair that both investors
and lenders request protection against such risks, in the form of some insurance.
Political risk insurance will usually include cover any breach on the part of the host
government relative to specific undertakings agreed upon in the BOT agreement.
18.9.11 Political Risk Insurance
This insurance is usually provided by either the lenders or investors own export
credit agencies or by the World Bank’s newly created agency known as “Multilateral
Investment Guarantee Agency” (MIGA) (See also Chap. 17, or still the U.K’s
department known as “Export Credit Guarantee Department” –ECGD).
In actual practice, the mechanism of this insurance may not be easily
implementable because these agencies will in turn require additional assurances
from the host government.
18.9.12 Force Majeure
“Force Majeure” refers to those risks, albeit small, which cannot reasonably be
insured against.
Commercial banks and investors will not be willing to assume these risks in a
BOT project, and they will seek support from the host government.
A typical “Force Majeure” event is for example, the invasion of the host country
by an invader.
It is logical that it is the host government’s responsibility to provide some
reasonable coverage for uninsurable force majeure events.
18.9 Analysis of BOT Project Risks
523