Q. Under the investment insurance scheme, why is it necessary to obtain the host country’s approval before issuing Dhaman’s guarantees?
A. . Dhaman’s Convention (Articles of Association) stipulates certain limits to the total value of insured transactions in any of the member countries. Therefore, in order for each member countries to choose the priority investments to be insured by Dhaman, it is a prerequisite to obtain beforehand the host country’s prior approval (also called Non Objection) of Dhaman providing the insurance cover. In addition, such preapproval enables Dhaman to implement its preferred creditor status which allows the recovery of political risk related claims.
Q. Does Dhaman cover existing investments?
A. Yes. Dhaman covers both existing and new investments.
Q. What is the indemnity under the investment insurance contract?
A. In case of materialization of one of the insured risks, Dhaman pays the insured investor 90% of the incurred loss. The investor bears 10% of the loss, also called deductible. The insured has to retain the deductible for its own account and is not allowed to insure it elsewhere.
Q. Why isn’t the beneficiary allowed to seek coverage for the deductible?
A.This is to encourage the investor to avoid any actions that may lead to the materialization of an insured risk and to stand with Dhaman in the recovery of the loss from the host country.
Q. In case Dhaman recovers the total amount of the loss after the payment of the claim, does it pay back the insured his share of the loss i.e. the deductible?
A.Yes. This means that at the end of the day the inured will not bear any loss.
Q. Under the investment insurance policy, can the insured investor cover different current amounts of guarantee for each risk?
A.Yes this is allowed. The investor determines at the beginning of each contractual year the amount to be insured for each of the four types of risks.
Q. What is the maximum line size for both export credit and investment insurance?
A.The maximum size for a single transaction (export or investment) must not exceed 10% of Dhaman’s capital and reserves. This limit can be raised to 20% of the capital and reserves for exports or investments of strategic importance for member countries. Dhaman can however provide cover for transactions that exceed the previously indicated limits through mobilization of additional capacity from the reinsurance market.
Q. What is the per country limit?
A.Dhaman’s per country exposure must not exceed the equivalent of its capital. This limit can be increased to the capital plus reserves in special circumstances.
Q. does Dhaman insure the investor in his own country?
A.Dhaman can insure an investor in his own country provided the invested funds are transferred from abroad.
Q. How are insurance premiums calculated?
A.Insurance premiums reflect the risks associated with the insured transaction such as the country risk, the obligor risk, the tenor, the sector etc.
Q. Did Dhaman pay any compensation in the past?
A. Dhaman pays claims as long as the insured is in compliance with the terms and conditions of the insurance contract. The cumulative amount of claims paid since Dhaman started its operations in 1974 and until the end of 2014 reached USD 164 million.
Q. How is Dhaman’s financial position affected by the compensations paid?
A.Dhaman’s financial position is not affected by the compensations paid. In fact, by virtue of its preferred creditor status, Dhaman was able by the end of 2014 to recover from its member countries 100% of political risk related claims. Its recovery rate of commercial risk related claims is also high compared to the industry thanks to Dhaman’s network of debt collection agencies and lawyers. Reinsurance also plays an important role in minimizing the impact of paid claims on Dhaman’s financial position. Since its establishment in 1974 and until December 2014, Dhaman was able to recover USD 152 million representing 92.7% of the total paid claims which is an exceptional recovery rate compared to the standards of the industry.