Political risk insurance cover to mitigate losses:

MIGA promotes direct foreign investments

Sanjeevi Jayasuriya

The Multilateral Investment Guarantee Agency (MIGA) under the umbrella of the World Bank Group works towards promoting direct foreign investments by providing political risk insurance cover to mitigate losses, said Chief Counsel/Advisor Dr. Srilal M. Perera.

The Board of Investment will play the role of a natural partner in this process. MIGA has facilitated a US $ 21,000 billion investment under its insurance cover worldwide.

The MIGA is dedicated to alleviate poverty and help development in a country. It is a billion-dollar capital agency where 11 member countries have signed the agreement, he said.

Sri Lanka is considered a post-conflict member state and had obtained the MIGA membership.

The agency was set up in 1988.

The country has great potential in many areas including logistics.

The MIGA has the priority to assist the country to bring in investments and the conflict areas are of concern to provide technical assistance and capacity building, he said.

The political risk insurance covers four categories of risks - expropriate and nationalization risks, transfer and conversion risks, war and civil disturbance risks and breach of contractual agreement risks. Each country is scaled according to the four categories of risks and the cost of the cover is determined accordingly.

“We cover only new investment as a fresh flow of investment is necessary for a country’s development. We avoid payment of claims without salvaging the situation.

Out of five claims three claims made by Kenya, Nepal and Madagascar have been paid so far”, he said. Investors are encouraged to obtain insurance cover provided by the MIGA. It is not a Government guarantee.

It mitigates the risk concerns and is dedicated to development to increase production and employment opportunities.

The MIGA will not replace or compete with commercial insurance schemes. It supplements and complements other insurance schemes, he said.