Ultimately, our philosophy is to work closely with experienced and influential clients, partner with multilateral institutions, and build a diversified portfolio to effectively manage political risk in emerging markets. That’s it.
This fall, Risk & Insurance Editor-in-Chief Dan Reynolds spoke with Dan Riordan, head of political risk and credit at MSIG USA. After primarily securing Japanese interests in the United States, the company has focused more on servicing U.S.-based companies and interests around the world.
Below is a transcript of that discussion, edited for length and clarity.
Risk and Insurance: Dan, great to talk to you again. What drew you to joining MSIG USA and what opportunities did you see at the company?
Dan Riordan: Several factors drew me to MSIG USA. First, the company’s position as one of the world’s top insurance companies was outstanding, and its global presence and scale were attractive and exciting. Second, MSIG USA’s interest in expanding into specialty insurance aligned with my own passions. I have a particular interest in political risk, credit and guarantees and saw an opportunity to develop these areas.
Finally, I enjoy the innovative side of insurance, especially developing new products for global markets. MSIG USA has transitioned from primarily servicing Japanese companies in the United States to entering the public market and developing new products. To me, that’s the most interesting part of this industry.
R&I: What are your plans for expanding your business with MSIG USA and how will you leverage MSIG USA’s global presence?
DR: MSIG USA is part of a global company that provides us with tremendous resources and reach. I recently participated in a call with MSIG’s head of Asia, the CEO of Hong Kong, and the CEO of the UK. A few weeks ago, I was meeting with a European CEO in Germany. We will also be speaking with CEOs in Australia and Singapore about our capabilities to enter those markets. This industry is global in nature, so it’s very important to have these connections and discuss our business around the world.
While political risk and credit insurance are part of MSIG USA, our businesses include investments, loans, corporations, banks and multilateral institutions with operations around the world. The ability to leverage our global presence and collaborate with international stakeholders is critical to our success.
R&I: What makes MSIG USA different in the current market, especially in the US?
DR: I think the US market is somewhat underserved in the political risk and credit insurance space. Demand is outstripping supply in these areas, and banks and public sector institutions are increasingly seeking more capital and protection from private insurance companies.
This trend has been developing over the past 10-15 years and is currently at its highest point. There are currently many opportunities in this field, which was a key factor in my decision to join MSIG USA. In my first eight weeks alone, we have received over 300 applications for our political risk and credit business and have already closed five global deals. Momentum remains strong and new applications continue to flow, allowing us to complete transactions at a steady pace.
I think there is great potential for these specialty products in the US, UK, Europe and Canada, where large-scale infrastructure and project finance activity is taking place, but there is also a lot of work underway in emerging markets. It’s inside. Our S&P Class 15, A+ rating and the expertise of our team has opened doors for banks, especially in New York.
In addition, Japanese banks, which have strong historical ties with Latin American countries such as Brazil and Peru, are actively involved in infrastructure projects in those countries. We have more opportunities in the region and this is consistent with our interest in medium to long term infrastructure projects, projects with deals spanning 5, 10, 15 and even 20 years. We leverage the underwriter’s expertise in As a political risk insurer, we must thoroughly investigate projects, including understanding the interests and motivations of our insureds and conducting financial reviews of loans and equity investments.
The work is hard, but also exciting. We expect approximately half of our political risk and credit business to come from the United States and Canada, with the remainder coming from our relationships with brokers in London, Europe and Asia through MSIG Group.
R&I: Who would fit into your team?
DR: I like creative insurers who are willing to take on more difficult risks, learn from them, and are interested in innovation.
Over my 30+ year career, I have learned that products such as political risk and trade credit risk are never static, as markets, project finance and investors’ risk perspectives constantly change. We need to be able to adapt with the right products and services.
It’s also important to hire people who are challenging but also fit well with the team. We have daily stand-up meetings to discuss submitted proposals. I love this meeting. Because I believe this meeting brings together the diverse expertise and unique global perspectives of our team. Team members come from a variety of backgrounds, including Mexican-born Javier Gomez and Lebanese-born Richard Abizaid. Getting all these inputs is very important.
R&I: What needs do customers have from their insurance companies, and how can MSIG USA differentiate itself in terms of product offerings and building relationships?
DR: Success comes first and foremost from being responsive. We already have a strong foundation of financial acumen and global presence, and we are currently working on further branding to increase MSIG USA’s visibility in this market.
MSIG USA previously focused on serving only Japanese companies in the market, so I often find myself explaining who we are to brokers and clients. In a sense, we are the new player on the block, and brokers love it.
But carriers test carriers when they offer new coverage and are quick to turn them down if they can’t provide the right solution, can’t offer innovation, and most importantly, can’t respond. . Brokers are used to receiving emails from carriers a week later, so they are often surprised when they get a call back within 24 to 48 hours.
These are small things that may sound a little old-fashioned, but they work and really help differentiate us. We also believe it’s important to recruit new graduates for internships and train them in their specialized fields, as only a limited number of schools offer comprehensive training in these niche fields.
Mentoring and coaching are valuable opportunities to strengthen your team. I strive to communicate effectively and work well with new employees. When new team members join, I emphasize that they should not expect to become experts right away. Because it’s important not to pressure yourself to understand everything right away.
R&I: What specifically are the risks covered by political risk insurance?
DR: The main coverage areas for political risk insurance are expropriation or nationalization, currency inconvertibility and transfer, and political violence. Expropriation or nationalization coverage protects investors from the government seizing assets without providing fair compensation. Currency inconvertibility and remittance coverage protects against the inability to convert or remit local currency due to government action or inaction. Political violence coverage protects against property damage caused by politically motivated acts such as war, civil war, and revolution.
R&I: Could you give some specific examples of political risk events that are currently being talked about in the industry?
DR: There is a lot of interest in mining projects in Latin America and Africa, but many mining companies are concerned that governments may decide to nationalize the projects once ore begins to be mined. This is an example of expropriation, which also occurs in countries such as Indonesia and Bolivia. There is typically a six-month waiting period before coverage begins, during which the insured must make every legal effort to resolve the situation through mediation or arbitration. If the problem is not resolved after 6 months, you can call the insurance policy and the insurance company will pay the claim.
Venezuela is another example. Over the past 15 to 20 years, more than 10,000 expropriations have taken place. The government is mostly in the business of expropriation.
R&I: From a broader perspective, how do you view political risk and how do you think about it philosophically?
DR: MSIG USA is focused on working with powerful, influential, and experienced insureds as our first line of defense in managing political risk. This includes large investors, lenders, and public institutions such as the World Bank, the European Bank for Reconstruction and Development, and the Asian Development Bank. We value partnering with these organizations because they have significant influence in emerging markets and are often preferred creditors.
Our approach is to build a diversified portfolio over time and manage our own risk exposure. We purchase political risk coverage to help our clients, whether public or private banks, manage their limits and exposures, avoid concentration risk, and comply with regulatory requirements such as the Basel Agreement. I understand what you are doing. By providing insurance from a reputable company like MSIG USA, our clients can also benefit from capital relief.
Ultimately, our philosophy is to work closely with experienced and influential clients, partner with multilateral institutions, and build a diversified portfolio to effectively manage political risk in emerging markets. That’s it. &
Dan Reynolds is the editor-in-chief of Risk & Insurance magazine. He can be reached at (email protected).
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