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Political risk insurance (PRI) can protect an eligible energy investment against specified losses caused by defined government actions or political events. Depending on the provider and contract, cover may include expropriation, restrictions on currency conversion or transfer, political violence, certain government contract breaches, or failure to honor qualifying financial obligations. It is not blanket protection against country, regulatory, or project risk: the policy or guarantee’s wording, eligibility rules, and claims conditions determine what is covered.
What does political risk insurance cover for an energy project?
Providers may offer cover for one or more named political perils, separately or in combination. The Multilateral Investment Guarantee Agency (MIGA) lists the categories below for eligible investments. The U.S. Export-Import Bank (EXIM) also describes political-only cover for qualifying transactions; under that approach, broad commercial risks remain with the lender or supplier.
| Coverage | What it may respond to | Important boundary |
|---|---|---|
| Currency inconvertibility and transfer restriction | A government action or failure to act that prevents an investor from legally converting local currency into hard currency or transferring currency out of the host country. | It addresses restrictions on conversion or transfer, not a fall in the currency’s value. |
| Expropriation | Certain government actions that reduce or eliminate ownership, control, or rights in an insured investment. MIGA describes both outright and creeping expropriation and says partial cover may be available in limited circumstances. | An adverse law, tariff change, permit decision, or other regulatory action is not automatically expropriation. |
| War and civil disturbance | Depending on the wording, loss, damage, destruction, or disappearance of tangible assets, or total business interruption, caused by politically motivated war or civil disturbance. MIGA’s description includes revolution, insurrection, coups, sabotage, and terrorism; its power-sector brochure also describes temporary-interruption cover. | The insured peril definition and the interruption threshold in the issued contract matter. |
| Breach of contract | A government’s breach or repudiation of an investor contract, potentially including a concession or power purchase agreement (PPA). MIGA says cover may extend to certain state-owned enterprises. | The investor generally must use the contract’s dispute process. Compensation may depend on denial of recourse or non-payment of an award after a specified period. |
| Non-honoring of financial obligations | A government’s failure to pay a qualifying unconditional financial obligation or guarantee when due. MIGA’s power-sector material says this cover does not require an arbitral award. | The obligation must be unconditional and meet the provider’s requirements. |
These are descriptions of available cover, not a promise that any particular project qualifies. The named insured, investment structure, host country, counterparties, peril trigger, and issued wording all affect whether a claim can be made.
Does political risk insurance cover currency devaluation?
No, not under MIGA’s described currency inconvertibility and transfer restriction cover. MIGA states: “Currency depreciation is not covered.” That cover instead concerns a government-caused inability to legally convert local currency or move currency outside the host country.
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The distinction can matter when a project collects local-currency tariffs but owes hard-currency debt or expects to remit returns abroad. A depreciation can reduce the hard-currency value of revenue even when conversion and transfer remain legally possible; a restriction that blocks conversion or transfer is a different risk.
Does it cover a government breaking a power purchase agreement?
It can, if the project has qualifying breach-of-contract cover and the facts satisfy the policy’s trigger and claims conditions. MIGA describes possible cover for government breach or repudiation of an investor contract, including energy agreements such as PPAs and concessions. The investor generally has to invoke the contract’s dispute-resolution process; compensation may depend on being denied recourse or on an award remaining unpaid for the period specified in the contract.
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That is not the same as automatic protection against any PPA payment default. Check who the insured counterparty is, whether the agreement is an eligible investor contract, what dispute steps are required, and when a claim can be paid. A separate non-honoring cover may apply to a government’s failure to pay an unconditional financial obligation or guarantee, subject to its own requirements.
What does political risk insurance exclude or leave with the project?
There is no universal exclusion list: policy labels, definitions, and exceptions vary by provider and contract. The boundaries established by the coverage descriptions are more useful than assuming all political or country risks are insured.
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- Currency depreciation: a decline in currency value is outside MIGA’s described conversion-and-transfer cover.
- Ordinary regulatory action: MIGA’s April 2013 power-sector brochure says bona fide, nondiscriminatory measures taken by a host government in the exercise of its legitimate regulatory authority are not considered expropriatory. That is MIGA’s product description, not a universal rule for every PRI policy.
- Commercial and operating risks: political-only cover does not take on broad commercial risks, such as a borrower’s ability to withstand market disruption. Nor should it be treated as cover for every project, market, or counterparty problem.
- Unmet contract conditions: a loss may fall outside cover if the named peril is not triggered, a required dispute process is not followed, or the obligation or investment does not meet eligibility terms.
PRI may also be insufficient on its own to make a renewable project in a fragile or conflict-affected market commercially financeable. The OECD’s 2025 clean-energy report notes that donor support and risk-sharing arrangements can still be needed.
Why do these risks matter for energy projects?
Energy projects may depend on multiple public and local stakeholders, while earning revenue in local currency and needing to convert or repatriate funds. The OECD’s 2025 clean-energy report describes a MIGA PRI example for solar mini- and metro-grids in the Democratic Republic of the Congo. The project supported electricity service to 23,000 households; MIGA offered partial expropriation cover so that expropriation affecting an individual mini-grid could trigger compensation even if the larger company remained viable.
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MIGA’s April 2013 power-sector brochure also documented historical examples across different energy technologies: an 84 MW geothermal plant in Kenya with a $99 million guarantee, a 44 MW wind farm in Nicaragua with $16.3 million in guarantees, and cover of up to 20 years for a Rwanda methane-to-power project. These are historical illustrations, not current pricing, capacity, or evidence that equivalent cover is available today.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What should an energy project check before relying on PRI?
Compare the proposed policy or guarantee with the project’s actual exposures. MIGA identifies factors such as location, project and financial viability, sector, foreign-currency proceeds, environmental impact, and local participation among its project-selection considerations. For any provider, the issued documents should resolve the following:
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- Do the host-country and investor-nationality requirements fit the project structure?
- Which political peril is named, and what precise event triggers cover?
- Are the relevant government or state-owned counterparties included?
- For contract-breach cover, what dispute steps, waiting periods, denial-of-recourse tests, or unpaid-award conditions apply?
- Does war or civil-disturbance cover address physical assets, business interruption, or both, and what interruption threshold applies?
- How are loss, asset value, and compensation calculated? What limits and coverage term apply?
- What exclusions, exceptions, cancellation terms, and transfer rights apply?
- What notice, documentation, and other claims-process requirements must the insured meet?
Because eligibility and triggers are contract-specific, a project should compare current provider documents and ask a specialist political-risk broker, insurer, or public guarantee agency about the proposed structure before treating PRI as a financing solution.
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