War, terrorism, and factional violence continue to threaten oil and gas production. Moreover, oil-and-gas contract renegotiations and changes in operating rules underscore the potential for interference by host governments. Careful risk management that includes political risk insurance can enable companies to take advantage of opportunities in developing markets.

Companies in the oil and gas business—risk takers armed with technical, engineering, and commercial expertise—constantly face the evershifting challenges of mitigating losses instigated by outside forces. The forced nationalisation of international oil concessions has historically been a source of political risk; however, today, companies are more commonly at risk of “creeping” expropriation—i.e. deprivation by government of the economic benefits of a company’s investment.

In addition, political risk often extends to investors and associated service providers to include:

• Seizure of fixed or mobile assets owned or leased
• Physical damage and loss of revenue due to political violence
• Substantive impairment of contract rights such as prohibitive tax increases that target foreign-owned businesses
• Forced sales or abandonment of overseas investments
• Default on payment obligations or other frustration of contracts due to political risk
• Currency restrictions that block the transfer of funds