What is meant by commercial and political risk?

What is meant by commercial and political risk?

Commercial risk = the risk that your debtors will not pay you due to their deteriorating financial position (declared or suspected insolvency).

Political risk = any event that may apply as force majeure for your customers in other countries, resulting in them being unable to pay their invoices. These include:

  • political events, such as war, revolution or insurrection
  • natural disasters, such as earthquakes, volcanic eruptions or tidal waves
  • economic difficulties, such as a shortage of foreign currency
  • actions, decisions or negligence by governments that constitute arbitrary government decisions.

This risk may also take the form of the withdrawal of import licences or foreign exchange permits, embargos, the imposition of import licences on products that could previously be imported freely, or the non-transfer of funds paid in the local currency.

Force majeure will be accepted as the cause of a claim if three conditions are fulfilled:

  • total impossibility of execution
  • unpredictable and unavoidable circumstances
  • error on the part of the policyholder invoking force majeure in the events leading up to the case of force majeure being totally excluded.