Political Risk Insurance to Capitalize on Opportunities in Venezuela

Following the United States’ recent actions in Venezuela, companies can manage the myriad of risks involved through political risk insurance (PRI) to capitalize on business opportunities.

In the aftermath of the United States’ intervention to capture and remove incumbent Venezuelan president Nicolás Maduro in early 2026, US companies and others are returning to conduct oil and gas and other business in Venezuela. Over the last few months, the US administration has dictated sweeping reforms to Venezuela’s hydrocarbon and mining laws. These developments add to Venezuela’s already complex geopolitical and sovereign risk profile, shaped by economic distress, political dynamics, and a restrictive sanctions regime.

These factors have significant implications for commercial engagement, cross-border investment, and capital flows. PRI has reemerged as an important tool for mitigating losses tied to state actions, political violence, currency controls, and contractual disruption. PRI offers companies and financial institutions a way to manage uncertainty when engaging with Venezuelan counterparties or assets.

UNDERSTANDING POLITICAL RISK INSURANCE GENERALLY

PRI generally covers defined events that can result in financial loss due to government actions or political disturbances. When structured carefully, PRI can complement legal and contractual protections, support financing and investment decisions, and provide improved risk management in otherwise unpredictable environments.

PRI is commonly used by:

• multinational companies with overseas operations,
• project sponsors and infrastructure developers,
• private equity and other financial investors, and
• lenders and export-oriented businesses.

PRI is not a substitute for legal or regulatory compliance, nor does it eliminate political risk. Instead, it reallocates certain defined risks to insurers under agreed terms.

WHY POLITICAL RISK INSURANCE MATTERS IN VENEZUELA

Venezuela is a high political risk jurisdiction where government actions directly impact investment viability, dispute resolution prospects, and the enforceability of commercial rights. The following risks are pronounced in Venezuela:

• State Interference and Expropriation: Government measures affecting ownership or value of foreign investments, whether through formal expropriation, regulatory change, or indirect state intervention, are tangible concerns.
• Currency Convertibility and Transfer Restrictions: Long-standing foreign exchange controls impede the conversion of currency and restrict repatriation of profits or capital.
• Political Violence and Unrest: The potential for political violence remains a risk in the broader geopolitical environment.
• Sanctions and Trade Measures: Sanctions complicate commercial activity, potentially resulting in coverage exclusions tied to compliance obligations or enforcement of sanctions law.

STRUCTURING POLITICAL RISK INSURANCE FOR VENEZUELAN EXPOSURES

Effective PRI in Venezuela requires careful attention to the following.

• Scope of Covered Events: Definitions of political acts must clearly encompass relevant triggers under Venezuelan conditions, including government interference, force majeure events tied to political volatility, political violence, and currency controls.
• Sanctions Carveouts and Compliance Overlap: Policies must be carefully structured to address how sanctions-related restrictions are treated, including whether coverage is triggered when losses are linked to compliance with sanctions or export controls.
• Operational and Disclosure Obligations: Investors and insurers must align on the disclosure of existing exposures, preexisting conditions, and known political or regulatory disputes.
• Claims Process and Proof: In volatile environments, evidentiary challenges, including access to records, documentation, and government responses, must be anticipated in policy construction.

KEY DIFFERENCES BETWEEN POLITICAL RISK INSURANCE AND OTHER INSURANCE PRODUCTS

PRI serves a specific function within the broader insurance landscape and should not be confused with more traditional lines of coverage, such as aviation, marine, commercial property, or general liability insurance. While these products may coexist, they often address different risks.

Traditional first-party insurance policies, such as aviation and commercial property insurance, are generally designed to cover physical loss or damage to assets arising from operational or accidental events, including theft, mechanical failure, weather-related incidents, or navigational hazards. These policies ordinarily respond regardless of political context in a certain coverage territory, provided certain exclusions do not apply. Depending on the scope of traditional insurance policies, they may overlap or provide similar coverage to PRI subject to specific policy terms or covered territories.

PRI, on the other hand, is specifically triggered by sovereign or political acts, including expropriation, currency controls, government contract repudiation, or politically motivated violence. PRI is focused on why and how damage occurs—namely, whether loss or damage results from government action or political instability—rather than operational risk. Further, PRI reimburses the insured for similar types of loss as traditional insurance (e.g., physical loss or damage or business interruption loss) but also provides cover for financial losses that are typically excluded from traditional insurance, such as investment-related loss from expropriation, currency inconvertibility, sanctions, or contractual breaches.

PRI coverage, including as to political violence and war-related perils, may be available as standalone insurance or as an endorsement or “buy-back” on traditional insurance policies.

BEST PRACTICES WITH PRI

Given the evolving landscape, it is unclear whether PRI will be made available to investors for operations in Venezuela. For example, although the US administration recently announced that the US International Development Finance Corporation (DFC) would be willing to underwrite political risks for vessels operating in the Strait of Hormuz, it has not made a comparable statement regarding PRI for Venezuela-related risks. Potential sources of PRI may nevertheless include the DFC, the World Bank’s Multilateral Investment Guarantee Agency (MIGA), other similar institutions or public agencies, as well as the commercial insurance market.

Recent legislative reforms aimed at restructuring Venezuela’s hydrocarbons and mining sectors may also create additional opportunities to protect foreign investment, including through the availability of international arbitration for contractual disputes. Taken together, legal reforms and PRI could provide a layered risk-mitigation framework, with each mechanism reinforcing the other.

When placing PRI insurance, implementing PRI early and tailored to specific exposures can provide valuable protection as part of a broader risk mitigation strategy:

• Integrate PRI at the outset of transaction planning to impact deal structuring, financing terms, and risk allocation.
• Harmonize PRI with sanctions and export control strategies to avoid coverage gaps that could undermine recoveries.
• Obtain specific policy coverage to protect underlying exposures, as generic “off the shelf” coverage is rarely sufficient in high-risk jurisdictions.
• Complement PRI with contractual protections (e.g., arbitration provisions) and broader political risk management strategies.

When pursuing coverage under PRI insurance, a comprehensive understanding of the coverage terms, conditions, exclusions, representations and warranties, and procedures for claim presentment, negotiation, and dispute resolution is critical. This includes providing adequate notice to insurers and ensuring compliance with all substantive and procedural requirements.

Early engagement with legal, compliance, and risk advisory teams is essential to ensure PRI coverage matches the actual risk profile and circumvents common pitfalls.