The Center for American Progress (CAP) has committed to leading the effort to launch a pilot insurance program, Palestinian Political Risk Insurance (PPRI) which will make a new form of political risk insurance available to Palestinian exporters. Project partners anticipate that political risk insurance will help Palestinian companies better manage the risks of exporting goods, expand export activity, and increase business growth, which in turn helps stabilize the region. PPRI will also increase incentives for exporters to utilize prudent risk management and security practices, which will improve economic and security sectors for both Israelis and Palestinians. The pilot program will help determine the feasibility of an expanded coverage in the Palestinian territories as well as the possibility of creating similar political risk insurance coverages in other conflict regions.
American International Group committed $250,000 to fund PPRI start-up and technical assistance costs. Marsh USA, a global risk and insurance adviser, has provided guidance and technical assistance in developing the product. CGI member and Trio Foundation Trustee Mary Ann Casati, with legal assistance from Sidley Austin, has personally committed to providing a $1 million social investment loan to the insurance fund. The US Overseas Private Investment Corporation, OPIC, has pledged to guarantee the social investment. The Middle East Investment Initiative (MEII) and the Ramallah-based National Insurance Company Ltd. (NIC) are participating in 12 and eight percent, respectively, of the insurance fund's risk share. NIC will also provide complementary insurance coverage for goods in transit and will administer PPRI by issuing policies, providing customer support, and overseeing claims handling and reporting. MEII and CAP will offer additional technical support for PPRI.
The major project activities include identifying and hiring permanent staff, organizing the legal structure of the entity, enlisting partners to support the $1.25 million insurance fund, working with local partners to address the ongoing needs of the Palestinian business community, strengthening connections between PPRI and a US Agency for International Development (USAID) trade facilitation program, developing the insurance policies, drafting and signing legal/corporate documents, and other work associated with start-up operations.
At the 2005 Clinton Global Initiative (CGI) Annual Meeting, President Clinton challenged participants to explore political risk insurance as a means of removing obstacles to economic development in the West Bank and Gaza. Inspired by this challenge, CAP and its partners including Fried Frank, Mary Ann Casati (trustee of the Trio Foundation) and The Portland Trust began investigating how to make political risk insurance a reality.
At CGI 2006, the PPRI project team, joined by Marsh & McLennan Companies, International Capital Strategies, and Aon Corporation, committed to creating a business plan and testing its feasibility against market conditions. At CGI 2007, project partners committed to create and launch PPRI. In 2008, through the efforts of the CAP-led steering committee, the MEII, NIC, and OPIC signed a memorandum of understanding outlining a commitment to launch PPRI. In 2010/11, CGI member Mary Ann Casati, with Sidley Austin as legal advisor, offered to provide a $1 million social investment loan to the project to expedite its launch.
PPRI would not be possible without President Clinton's vision for establishing new political risk insurance to encourage additional investment in conflict regions, and for the CGI forum, which not only introduced the vision but provided a forum for bringing together the diverse group of experts - legal, insurance, private equity, business, political, and regional - required to successfully create a complex international insurance program.
CAP is seeking new financial partners, such as insurance companies or international entities, to expand the $1.25 million pilot program. These investments would take the form of a traditional investment in a commercial insurance program that offers potential returns commensurate to the level of investment and risk assumed. Partners are also seeking operational funds to transform the pilot project into a commercially sustainable program.
Project partners are happy to offer best practice information for implementing economic development projects in the Palestinian territories and broader Middle East. The project partner, MEII, will be helpful in providing the best practice information as it has implemented a Palestinian loan guarantee program that has created more than 7,700 new jobs by approving nearly $100 million in new loans to small- and medium-sized businesses. Partners are also able to offer advice in how to improve coordination and deepen partnerships with U.S. and international government entities