One of the main impediments to investment in Iraq is the lack of sizeable enough insurance coverage to meet skyrocketing demand. In particular, there is a need for larger and cheaper “Interest from investment banks has taken off in the past three to six months and demand [for insurance products] has changed significantly,” says William Wakeham, managing director of AAIB Insurance Brokers. “We’ve seen a marked increase in returning Iraqi capital. These are people who are insurance-savvy and have a Western mindset for business.”

Supply and demand

AAIB started operations in late 2004. Registered in Jordan but with offices in Baghdad and Erbil, it originally focused on insurance for security organisations and foreign workers on the ground in Iraq but now brokers cargo, political risk, sabotage, kidnap and ransom, and terrorism coverage. “We’re trying to develop an insurance supply chain from London right through to Iraq,” says Mr Wakeham.


Improvements in security have brought rates down drastically. “There has been a phenomenal fluctuation in rates. Cargo attacks, for example, are down to less than 2% – at one time it was 20%, meaning one out of every five ships was attacked. Human rates are as low as 1% now,” adds Mr Wakeham.

Credit risk is still not covered and that is unlikely to happen in Iraq in the short term, he says, and it is not financially viable to insure low-value property (worth less than $20m) because the premium would be so high as to make it uneconomical.

In the pipeline

US companies have been asking for support from the Export-Import Bank of the US for Iraq business deals, but the bank has not been active in Iraq for the past few years due to the country’s ranking poorly in its risk ratings.

“Iraq has had a bad rating in the risk rankings we use and as such we have not been open for day-to-day transactions with the country, but we have a strong interest in doing business there and are going to be reviewing it in the near term,” John McAdams, senior vice-president at Ex-Im Bank, said at the US-Iraq Business and Investment Summit in Washington, DC, in October.

Ex-Im is waiting for the International Monetary Fund to complete a review of the country – perhaps by the end of 2009, although the timing is vague – and “will go from there”, Mr McAdams adds. “We are hopeful – though we don’t know – that Iraq’s risk rating will improve at that point.”

The US’s Overseas Private Investment Corporation, however, has “a sizeable portfolio and a good pipeline of projects in Iraq”, according to OPIC chief of staff James Moran.

OPIC has limited capacity to offer political risk insurance, meaning it is expensive and in short supply.

Private equity firm C3 is joint venturing with insurer Aon to make political risk insurance (PRI) coverage available as soon as the first quarter of 2010. Under the venture, Aon reportedly will offer PRI in tranches so there would be unlimited availability.

“That’s big – that’s the mothership,” says C3 chairman Llewellyn C Werner. “Once you convince companies their capital is not at risk, the large investments will really start rolling in.”

The cost of this supplement was underwritten by the United States government. Reporting and editing were carried out independently by fDi Magazine.