Insurance of Direct Investments Abroad

Insurance of Direct Investments Abroad

Insurance backed by the State Treasury

Direct investment abroad is a venture implemented for the purpose of establishing permanent (for a period of at least three years from the commencement of the investment) and direct economic ties expressed in the investor operating the business or exercising effective influence upon the business operated by another person, and also in administering the assets held as a result of expenditures made (in the form of pecuniary, material expenditures or expenditures in the form of intangible and legal assets) or as a result of operating the enterprise.

A direct investment may also take a form of operating a branch registered abroad or a representative office, provided that its assets and capitals are presented separately in the books of the investor.

Entities eligible
Insurance of direct investments abroad is available to domestic entrepreneurs i.e. entrepreneurs residing (natural persons) or established (legal persons) in the territory of the Republic of Poland.

Types of investments eligible for insurance
We insure direct investments which:

• are new i.e. carried out by the investor after filing an application for the insurance of a direct investment abroad and after paying the application fee, earlier expenditures may be included in the insurance cover only in justified cases
• are long-term, i.e. investments which will not be transferred or otherwise terminated by the investor within three years from their commencement
• do not pertain to the manufacturing of military equipment, narcotics, hallucinogenic or other similar substances
• are not connected with bribing of a foreign public official
• are not speculative

Examples of various forms of direct investments:

• acquisition of a foreign enterprise or its organized part
• creation and operation of a business abroad
• making expenditures towards expanding a business operated abroad
• providing additional contributions and granting loans by shareholders
• acquiring the ownership and other rights on a real property and other fixed assets located in the country of the investment in connection with a business operated abroad

Risks covered
Insurance protection covers losses incurred in connection with the implementation of a direct investment abroad, resulting from events defined as political risk.  The following events are considered political risk:

• expropriation resulting from an act or a series of acts of the State, in which the investment is located
• acts of political violence in the country of the investment, in particular, wars, insurrections, revolutions, riots, terrorist acts, sabotage or coup d´etat
• unilateral termination, withdrawal from a valid obligation towards the investor or a delay in performing valid obligations resulting from the enactment or amendment to legal acts or decisions by the state in which the investment is being implemented
• moratorium - announcement of a general payment moratorium by the government of the country of the investment
• inability to convert amounts deposited in a solvent bank in the local currency into a convertible currency, assigned to cover the receivables of the investor, or inability to transfer such amounts to the Republic of Poland

Subject of insurance
The subject of insurance protection includes net pecuniary and tangible expenditures, as well as intangible and legal assets contributed by the investor to a foreign business, which give the right to participate in profits, in the estate in bankruptcy, guarantee the right to vote, supervise and co-manage, understood as:

• contributions towards the share capital adjusted proportionally to reductions or increases of the share;
• separated capital of the branch or representative office
• additional contributions adjusted by repaid additional contributions
• receivables of a shareholder resulting from a loan, provided that its purpose and conditions indicate that it leads to the Insured exercising effective influence on the business
• capitals due to undistributed net profit
• net undistributed profit or loss

Expenditures connected with acquiring the ownership and other rights on a real property and other fixed assets located in the country of the investment, in connection with a business operated abroad, may also be covered by the insurance.

Duration of insurance
The insurance agreement is concluded for the duration of the investment. The investor may terminate the agreement at the end of each annual period of insurance. An insurance agreement may be concluded for a maximum of 15 years.

Costs
The costs of insurance comprise:

• an application fee, amounting to 1 per mille of the planned value of the investment according to enquiry submitted by the applicant, not less than PLN 500 and not more than PLN 2000 calculated according to the average exchange rates table published by the National Bank of Poland on the day the application is submitted
• the premium paid by the investor annually for each year of insurance

The insurance rates vary from 0.1% to 1.2%. The premium is calculated as a percentage of the insured sum – which constitutes the limit of our liability - based on the applied premium rate (dependant on scope of cover and country risk).