Contract Frustration (Government related): This insurance protects against non payment by the government or non performance where the government has agreed to deliver/do something ie deliver oil to Um Qasar. The cover also protects against the risk of a company losing its fixed costs (not profit) if it cannot complete its side of the contract due to political risk events. This insurance cannot make a bad contract good.
Contract frustration/termination/abandonment due to political force majeure: Contractors may have limited rights to collect termination payments from aid agencies or prime contractors in the event that contracts are cancelled or abandoned due to political force majeure, ranging from political violence to government action. Losses may involve work in progress, extra expense, demobilisation costs, etc. This type of pre-delivery/pre-acceptance contract frustration cover is available in principle.
Iraqi Government credit risk/failure to pay/performance risk: Contracts with Iraqi Government/Ministries are increasing in number. Payment under these contracts is usually facilitated by the Trade Bank of Iraq issuing Letters of Credit (LC). Coverage for non-honouring of these LCs is available for banks confirming or guaranteeing them. Contracts where the Iraqi Government/Ministries are obliged to perform (i.e. oil delivery) can also be insured.
Barter contracts, goods delivered in exchange for crude/oil products, have been completed. Cover for nonperformance of the government on this type of transaction is available.
Investment Insurance for Permanent Investments
Permanent investments in land-based assets and businesses in Iraq will require political risk insurance covering physical loss or damage due to Political Violence (war, terrorism, etc.), Abandonment of Operations due to Political Force Majeure, Expropriation and related risks, Breach of Contract (for example where the Iraqi administration grants oil and gas concessions, also concessions and contracts for infrastructure projects involving power, telecommunications, water, roads, etc.) and possibly Currency Inconvertibility. There is very limited availability of this cover, any project/investment must be extremely well structured and seen to be beneficial to the Iraqi government.
