Political and economic risks and insurance

Abstract

Having in mind that different regulations and strategies increasingly incorporate the areas concerning political risks, the author seeks to clarify more closely the different ways in which this kind of risk manifests itself in insurance industry. The author reveals that the aspect of political risks is increasingly becoming a relevant factor in considering investments, especially in developing countries. The paper contains conceptual definition of political risks, their underlying actors and factors, reviews the circumstances prevalent in the insurance industry, and shows Fitch's analytical approach to risk. The findings support the view that the insurance of political risks should be interpreted primarily as an auxiliary tool for overcoming state and social crises, rather than as the last resort used to make up for possible consequences of a lack of state or institutional capacity.