The UK’s Export Finance agency is to offer what it says is an “enhanced overseas investment insurance product” to better protect UK businesses that are investing abroad.
The enhanced support comes as the Department for International Trade “looks to encourage more UK companies to invest overseas, realising the opportunities presented by fast-growing developing economies around the world”, the UKEF said in a statement posted yesterday on the government’s website.
UKEF’s overseas investment insurance is designed to provide UK companies investing abroad with protection against losses, primarily related to political or extraneous events. The plan is to widen the scope of the risks against which the government is able to insure such companies, UKEF said.
“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,” UKEF added.
Secretary of State for International Trade Liam Fox is described in the statement as having formally announced the enhanced export insurance coverage for UK businesses.
In the statement, Fox is quoted as saying that the UK’s Department for International Trade understood the importance of making overseas direct investment possible for UK businesses looking “to grow their revenues and enter new markets”, which, he said, in addition to helping to build a strong domestic economy, also helped to “share prosperity and build strong bilateral relationships around the world”.
“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.”
James Bamford, Chairman of the Lloyd’s Market Association Political Risks, Credit and Financial Contingencies Business Panel, added that UKEF’s overseas investment insurance was “now a market-leading product, and 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,” Bamford said.
How it works
Those UK companies interested in UKEF loans, guarantees and insurance to help them to win, fulfil and get paid for export contracts, and protect investments made overseas must be based in the UK to be eligible, and seeking to invest in an enterprise outside the UK.
Sectors in which the UKEF has typically provided financial support to UK companies have, it says, included the aerospace, construction, oil and gas, mining and metals, petrochemicals, telecommunications and transport industries.
The policy premium, details and risks covered are decided on a case-by-case basis, but may include coverage to protect against 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, that might be imposed by the host state.
The policy pays out up to 90% of the loss after a specified waiting period, typically six months.
Further details about the UKEF export insurance product may be found by clicking here.