Political Risk
What Does Political Risk Mean?
Political risk refers to a risk directly related to political events that can threaten certain assets. Examples of political risks include government confiscation of assets, acts of war or terrorism, coups, and civil unrest, all of which can lead to various types of losses. Political risk insurance is designed to protect against such losses.
Insuranceopedia Explains Political Risk
Political risks can also involve issues related to currencies. For instance, if an event prevents a currency from being converted into U.S. dollars (or another relevant currency), this could be classified as a political risk.
Political risk insurance is especially important for individuals with investments in regions experiencing significant civil unrest. Major and sudden political changes in such areas can have severe and unpredictable effects on a policyholder’s assets. A political risk insurance policy helps mitigate these potential losses.
