Organisations involved with the infrastructure sector must build political risk assessments and protection mechanisms into their project decision-making to help safeguard future investments, according to Marsh.
In a report published today, the broker said the continued success of infrastructure projects, in both mature and emerging markets, was being jeopardised by increasingly interwoven political and economic threats.
"These political and economic threats manifest in a unique way for infrastructure projects and investors cannot avoid them simply by changing location. Additionally, the high visibility of foreign investors' involvement in infrastructure projects can amplify the political risks these organisations face, which is exemplified by recent events in North Africa", commented Julian Macey-Dare, international leader of Marsh's political risk and structured trade credit practice.
According to Marsh, the insurance market is now playing a pivotal role in global infrastructure development, as infrastructure investors and their lenders seek alternative methods to the more traditional forms of investment protection.
"Increasingly, infrastructure, private equity and pension fund investors are turning to the insurance market for investment protection. Political risk insurance can facilitate deals by offering a reassurance that mitigants are in place across a portfolio, meaning that investors may be willing to maintain or increase their participation, and enable deals that would never otherwise happen in the current climate."
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