Project Finance & Investments 

Credit & Political Risks Insurance (CPRI)

Project Finance Credit & Political Risks Non-Payment Insurance (NPI) is increasing recognized and adopted by the banks to support their risk distribution for project finance deals. Instead of traditional reliance on bank syndications, clubbing and Credit Default Swap (CDS) markets, Non-Payment Insurance (NPI) is regarded as a cost-effective, risk-effective and administratively efficient instrument to share and distribute Borrower Credit and Country/Political Risks involved in domestic and international project financing & investments.  

 

NPI policies are issued by financially strong S&P A+ and above rated investment grade insurers providing Unfunded Risk Capacity Protection to the project financiers. This risk distribution model involves sharing the risk with another solid trusted industry - Insurance - and also benefits the banks which don't view Insurers as a competition but more like silent risk partners.  

 

The risk protection is very robust managing both Borrower Credit Default Risk and Country/Political Risk affecting the project and scheduled repayment of the principle for the Bank. The policy framework could be enhanced to be Basel II & III compliant reducing risk-weighted assets and providing Capital Relief to the lenders. 

Key Benefits:

  • Comprehensive insurance protection against Borrower Credit and Country/Political Risks.

  • Non-cancellable Credit Insurance Limits by reputable Insurers

  • Basel II & III-compliant insurance policies, backed by the S&P A+ and above rated specialist insurers and reinsurers providing collaborative capacity.

  • Supplement & enhance risk distribution for Lender. Enabling enhanced lending capacity and upfront fee income.

  • Beneficial risk sharing arrangement with insurers as non-competing and silent risk partners.

  • Cost effective risk distribution technique for banks

  • Greatly reduced Borrower Credit Risk and Country Exposure Risk with benefit of regulatory Capital Relief

  • Flexible tenors for Short (upto 1 year), Medium (upto 7 years) and  Long Term (upto 20 years) projects and investment protection risks available

  • All policies are structured in a bespoke fashion catering to specific risk requirement of each project and lender requirements.

RISKS COVERED:​ 

For Banks / Lender, our 'Non-Payment Insurance' (NPI) fundamentally covers the risk of non-payment of loan obligation as per financing agreement.  

(1) Commercial risks involving Borrower :

  • Insolvency 

  • Protracted default i.e. not paying on due date

(2) Country / Political risks  

  • War, Civil War, Terrorism, Rebellion, Coup d’etat etc.

  • Government Moratorium

  • Confiscation

  • Expropriation

  • Nationalization

  • Force Majeure

  • Natural Disasters

  • Contract frustration

  • Currency transfer difficulties,

  • Inconvertibility

  • Public Buyer Default

  • Pre-shipment Credit Risks

(3) Contract Frustration & Political risks covering contracts with Government / Public Buyers :

  • Insolvency or default by either a public or privately owned entity

  • Non-trade capabilities 

  • Pre-export finance 

  • Pre-shipment political risk coverage

  • Unfair and fair calling of on-demand bonds

  • Currency inconvertibility and Exchange transfer 

  • License cancellation

  • Import/Export embargo

  • Confiscation, Nationalisation, Expropriation and Deprivation 

  • Construction Contractors Plant 

  • Failure to honour an arbitration award

  • Aircraft and Vessel Repossession

  • Mortgage Rights Insurance 

Let's start a dialogue ! Write to us : TCI@prudence-UK.com ; TCI@prudence-USA.com

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