Ukraine, The Gnomes of Zurich and the Borg
Zurich provides groundbreaking political risk insurance for capital markets transaction in Ukraine
Dateline: 04/23/2007 Schaumburg, Ill., April 23, 2007 -- Zurich’s unit offering political risk and trade credit insurance in emerging markets announced today that it recently provided political risk insurance (PRI) for a capital markets transaction in Ukraine. This is the first time that political risk insurance was utilized in Ukraine to manage the unique risks of a capital markets transaction. Zurich is supporting a $134.1 million Class A Notes issue of Residential Mortgage-backed Securities (RMBS) originated by PrivatBank JSCC and issued by Ukraine Mortgage Loan Finance No.1.The Zurich insurance policy protects against the risks of currency inconvertibility and expropriation of funds, providing coverage equal to 18 months of interest payments. In addition, a PRI reserve fund was established that will provide six months of interest coverage for the first 180 days after the occurrence of a political risk event.“This groundbreaking transaction, the first public RMBS issue out of Ukraine, highlights the importance of political risk insurance in helping make an issue more attractive to investors concerned about political risk and market volatility,” said Daniel Riordan, executive vice president and managing director for Zurich’s emerging markets unit. “PRI support can help elevate bond ratings to investment grade, often above the country’s sovereign currency rating.” [emphasis added]
Ukraine makes me nervous. It is not as bad as hoping Hugo Chavez or Vlad Putin won't swoop in and seize something, but still...