UKEF rolls out enhanced cover for investors

In a bid to encourage more British firms to invest overseas, UK Export Finance (UKEF) has launched an enhanced overseas investment insurance product.

The export credit agency said the new policy widens the scope of risks against which the government can insure UK companies investing abroad.

“It has been designed to offer cover where there is a commercial demand but the private sector doesn’t have the capacity, such as markets which may have complex legal or political contexts, or in which difficulties may arise over transferring local-currency earnings,” explained UKEF.

The policy provides cover against losses caused by specified risks, for up to 90% of the loss value. It can be renewed annually, with the same premium and terms maintained for up to a maximum of 15 years.

Risks covered may include war, civil war, revolution, and insurrection in the host state; expropriation or nationalisation of the enterprise in which the investment is made (or of its property) contrary to international law; and restrictions on remittances, including exchange controls, imposed by the host state.

As for eligibility, investing firms must meet the following criteria:

  • The entity is carrying out business in the UK and not simply acting as a conduit for investment outside the UK.
  • The entity is investing in an enterprise in a non-OECD country.
  • There is a lack of availability of cover from the private market on normal terms.
  • Where cover is requested for a guarantee in respect of an overseas investment, the party giving the guarantee must have an interest in that enterprise.

“Overseas direct investment can be a vital way for UK businesses to grow their revenues and enter new markets, building a strong domestic economy as well as helping to share prosperity and build strong bilateral relationships around the world,” noted Secretary of State for International Trade Liam Fox.

He said: “As an international economic department, the Department for International Trade is supporting UK companies to fully realise the benefits of the global marketplace with this new overseas investment insurance product from UK Export Finance.”

James Bamford – chairman of the Lloyd’s Market Association political risks, credit and financial contingencies business panel – believes UKEF’s overseas investment insurance will greatly enhance the support the private sector can provide.

“Together, we can offer greater assurance to UK investors and help them fulfil their international ambitions by focusing on advantageous commercial opportunities rather than political complications,” he commented.

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