Investment-Insurance

INVESTMENT INSURANCE

The investment insurance cover targets South African business entities, which want to invest in foreign countries. The investment insurance covers acquisitions or equity contribution and shareholder loans. This insurance coverage is provided against political risk only.

SCOPE AND LEVEL OF COVER

Equity investment or shareholder loans are covered against political risks, such as:

Expropriation, nationalisation or confiscation of the insured investment, including creeping expropriatory actions of the foreign government, which may cause a gradual erosion of profitability of the foreign business to the extent that the foreign business cannot operate for at least 1 (one) year as envisaged or produce profits for 3 (three) consecutive years.
War i.e. loss or damage to the investment due to war, civil war, rebellion, revolution or insurrection in the foreign country as well as loss due to the inability of the foreign business to operate for at least one year as envisaged or produce profits for 3 (three) consecutive years due to the occurrence of the abovementioned events.
Transfer risk i.e. loss directly due to any action by the foreign government that prevents, restricts or controls the transfer of the investment and/or shareholder loan or commercial loan or dividends and/or interest payments from the foreign country to South Africa for a period of at least 365 (three hundred and sixty five) days.

Indemnification by ECIC will be limited to 90% of the loss suffered by the investor. Premium payable in terms of the investment insurance cover will take into account the following:

The risk events in the country where the investment will be made;
The investment period to be covered; and,
The scope of covered political risk events.

QUALIFICATION CRITERIA

To qualify for this cover, an investment or shareholder loan must adhere to the following criteria:

It must be a new investment or additional to an existing investment and could be associated with a new project as well as the expansion or financial restructuring of existing projects or acquisitions involving the privatisation of a state owned enterprise.
Approval must be obtained from the host country government (where applicable) and the South African Reserve Bank;
The South African entity must hold at least 10% of the paid up share capital with voting rights in the foreign entity (with adequate protection of minority rights)