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Types of Coverage
Currency inconvertibility and transfer restriction Protects against losses arising from an investor’s inability to legally convert local currency (capital, interest, principal, profits, royalties, and other remittances) into foreign exchange and transfer local currency or foreign exchange outside the country due to government action or failure to act. Currency depreciation is not covered. On receipt of the blocked currency from an investor, MIGA pays compensation in the currency specified in the contract of guarantee.
Expropriation Protects against losses arising from government actions that may reduce or eliminate ownership of, control over, or rights to the insured investment. In addition to outright nationalization and confiscation, "creeping" expropriation—a series of acts that, over time, have an expropriatory effect—is also covered. Coverage is available on a limited basis for partial expropriation (e.g., confiscation of funds or tangible assets).
In case of total expropriation of equity investments, MIGA pays the net book value of the insured investment. For expropriation of funds, MIGA pays the insured portion of the blocked funds. For loans and loan guaranties, MIGA can insure the outstanding principal and any accrued and unpaid interest. Compensation will be paid upon assignment of the investor's interest in the expropriated investment (e.g., equity shares or interest in a loan agreement) to MIGA.
War, terrorism, and civil disturbance Protects against loss from, damage to, or the destruction or disappearance of, tangible assets or total business interruption (the total inability to conduct operations essential to a project’s overall financial viability) caused by politically motivated acts of war or civil disturbance in the country, including revolution, insurrection, coups d'état, sabotage, and terrorism. The cover protects against losses arising from physical damage of assets and total business interruption. For total business interruption, MIGA would pay the net book value of the total insured equity investment or the insured portion of the principle and interest payment in default as a direct result of a covered war and civil disturbance event. For tangible asset losses, MIGA will pay the investor’s share of the lesser of the book value of the project assets, their replacement cost, and the cost of repair of the damaged assets.
Temporary business interruption can also be included upon a request from the investor and would cover three sources of interruption: damage of assets, forced abandonment, and loss of use. For short-term business interruption, MIGA will pay unavoidable continuing expenses and extraordinary expenses to resume operations and lost business income or, in the case of loans, missed payments. This coverage encompasses not only violence in the host country directed against a host country government, but also against foreign governments or foreign investments, including the investor’s government or nationality.
Breach of contract Protects against losses arising from the government’s breach or repudiation of a contract with the investor. Breach of contract coverage may be extended to the contractual obligations of state-owned enterprises in certain circumstances. In the event of an alleged breach or repudiation, the investor should invoke a dispute resolution mechanism set out in the underlying contract and obtain a final arbitral award or judicial decision for damages. If, after a specified period of time, the investor has not received payment under the award, MIGA will pay compensation. MIGA may make a provisional payment pending the outcome of the dispute. MIGA may also elect to pay compensation without an award if the investor does not have recourse to a dispute resolution forum or there is unreasonable government interference with the investor’s pursuit of legal rights against the host government.
Non-honoring of sovereign financial obligations Protects against losses resulting from a government’s failure to make a payment when due under an unconditional financial payment obligation or guarantee given in favor of a project that otherwise meets all of MIGA’s normal requirements. It does not require the investor to obtain an arbitral award. This coverage is applicable in situations when a sovereign’s financial payment obligation is unconditional and not subject to defenses.