Category: Trade credit & political risk · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed 2026-06-05
Confiscation, expropriation and nationalisation (CEN) cover is the core peril of political risk insurance, addressing host government taking of investor property or rights — whether by direct expropriation (formal taking with or without compensation), ‘creeping’ expropriation (cumulative regulatory actions effectively destroying the value of the investment), or nationalisation (sectoral expropriation under nationalisation policies).
Category: Trade credit and political risk Also known as: CEN, CEN cover, expropriation insurance First codified: Lloyd’s PRI wordings from c.1970s; MIGA cover from 1988 Related legislation: Insurance Act 2015 [1]; ICSID Convention 1965 [2]; UK Bilateral Investment Treaties [3]
CEN cover addresses the historical core of political risk insurance: the risk that a host government takes the investor’s property, rights or investment without adequate compensation. The cover responds to three principal forms of host government action [4][5]:
Confiscation — direct taking of the insured’s assets by the host government without compensation, typically associated with criminal forfeiture, sanctions enforcement or punitive measures against the investor. Less common in modern PRI claims than expropriation.
Expropriation — formal taking of the insured’s investment by host government action, with or without compensation. Where compensation is provided, the cover responds for any shortfall between the compensation paid and the insured value of the investment. ‘Creeping expropriation’ — cumulative regulatory actions that, taken together, effectively destroy the value of the investment without any single formal taking — is a particular focus of modern PRI wordings.
Nationalisation — sectoral expropriation under a host government policy to bring an entire industry into state ownership. Historical examples include the 1970s nationalisations of oil and gas resources across OPEC member states, the various Latin American nationalisation programmes from the 1970s onward, and the more recent expansion of state ownership in certain resource sectors.
CEN cover typically includes ‘forced abandonment’ — situations where the host government’s actions or conditions force the investor to abandon the investment without formal expropriation. Examples include forced changes in equity structure, imposition of impossible local content or local management requirements, and forced changes in product pricing or distribution arrangements [4][5].
The international legal framework for expropriation of foreign investment is set by customary international law (which requires that expropriation be for a public purpose, non-discriminatory and accompanied by prompt, adequate and effective compensation — the ‘Hull formula’) and by the over 2,800 bilateral investment treaties (BITs) currently in force globally. The UK is party to over 90 BITs providing UK investors with treaty-based protection against expropriation in the relevant host states [3][6].
The ICSID Convention 1965 (Convention on the Settlement of Investment Disputes between States and Nationals of Other States) provides the principal forum for investor-state dispute settlement involving expropriation claims, with arbitration administered by the International Centre for Settlement of Investment Disputes within the World Bank Group. Investors with BIT protection can typically bring expropriation claims directly against the host state in ICSID arbitration, with awards enforceable in the territory of ICSID Convention member states [2][7].
The Insurance Act 2015 governs the duty of fair presentation and warranty rules for UK PRI placements including CEN cover. Disclosure of country political risk factors, sector-specific exposures and the investor’s prior relationship with the host government is critical to the fair presentation obligation [1].
The OECD Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence set standards applicable to UKEF and other OECD ECA PRI cover. Major transactions are subject to environmental and social due diligence with particular attention to land acquisition and resettlement (a common precursor to expropriation disputes) [8].
The MIGA Convention 1985 provides MIGA with mandate to issue expropriation cover for foreign investment in developing member countries. MIGA’s standard cover is closely modelled on the international law standards and provides cover for both direct and creeping expropriation [9].
A PRI placement covering CEN risk is structured around the insured’s identified expropriation exposure. The insurer assesses the host country political risk based on its proprietary methodology incorporating governance indicators, history of expropriation actions, sector-specific factors and the specific investment’s interaction with host government priorities. Premium rates for CEN cover form the largest component of typical PRI premium, with rates ranging from 0.2%–0.4% per annum for low-risk OECD-related transactions to 2.5%–5% per annum or more for higher-risk emerging market exposures [4][5].
The CEN cover responds to qualifying expropriation events, with waiting periods (typically 6–12 months) to confirm that the expropriation is final rather than reversible. Compensation paid by the host state offsets the insurer’s payment under the policy, with the insurer paying the shortfall between the insured value and the actual compensation received. For ‘creeping expropriation’ claims, the timing and quantification can be highly contentious — the insurer and the insured may disagree about the date on which the cumulative regulatory actions crossed the threshold from legitimate regulation to expropriation [4][5].
Subrogation rights are critical to the economics of CEN cover. Following payment under the policy, the insurer takes subrogation rights to pursue recovery from the host state, typically through bilateral investment treaty arbitration where the insured has treaty protection. Major recoveries from successful BIT arbitrations have substantially affected the long-term economics of the PRI market — though arbitration can take 5–10 years to resolution and recovery success is not guaranteed [4][5][7].
Historical CEN losses have arisen from a wide range of events. The Argentine economic crises (2001–2003 and subsequent years) generated multi-billion-dollar PRI claims as the Argentine government’s emergency economic measures were characterised as creeping expropriation. The Venezuelan oil sector nationalisation in 2007 generated further substantial PRI losses. The 2022 sanctions-related restrictions on Russian investments have generated PRI claims that are still under investigation and dispute [4][5].
Direct expropriation cover: responds to formal taking of the insured’s investment.
Creeping expropriation cover: responds to cumulative regulatory action effectively destroying investment value without any single formal taking.
Forced abandonment cover: responds to situations where the insured is forced to abandon the investment by host government action falling short of formal expropriation.
Sector-specific expropriation: addresses sector-targeted nationalisation programmes.
Selective discrimination cover: addresses discriminatory regulatory or tax measures targeted at the insured or its sector, often integrated with CEN as a related peril.
Forced divestment cover: responds to host government action compelling the insured to sell its investment at below fair market value.
License revocation cover: addresses revocation of operating licences, concessions or other authorisations critical to the investment.
Project finance CEN: tailored cover for project finance transactions where the project assets and offtake contracts are the principal expropriation exposures.
MIGA Coordinated cover: where the private market cover is structured to coordinate with MIGA’s primary cover, providing extended limits or wider scope.
A UK utility company invests US$420m equity in a power generation project in an emerging market. The investment is supported by a 25-year power purchase agreement with a state-owned offtaker and operates under a concession from the host state energy ministry. The investor places PRI for a 12-year policy period with CEN cover of US$300m, currency inconvertibility cover of US$200m and contract frustration cover of US$150m. Annual premium for the combined PRI placement is approximately US$3.6m (1.0% per annum across the combined sum insured). During the policy period, the host government implements a series of regulatory measures including imposed tariff reductions, mandatory local content requirements and selective taxation. Eight years into the policy period, the investor brings a claim under the creeping expropriation cover on the basis that the cumulative regulatory action has destroyed the project’s economic viability. The claim is investigated by the insurer with detailed analysis of the regulatory timeline; ultimately, after extended negotiation, the insurer settles the claim for approximately 75% of the limit, taking subrogation rights for a parallel BIT arbitration against the host state. Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
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