II. Why International Lawyers Should Care About PRI

Political risk insurance is deeply intertwined with international law. For a start, PRI’s contractual terms routinely incorporate legal standards familiar to international lawyers, such as the protection against uncompensated expropriation rooted in customary international law and codified in thousands of international investment treaties. Indeed, the domestic U.S. arbitral award of Revere Copper v. OPIC involving a dispute over the non-payment of a PRI policy continues to be cited by international investment arbitration tribunals to establish that measures that leave an investor’s legal title unaffected but take away economic control and effective use of an asset can still amount to an expropriation.Footnote ³

Investment insurance and investment treaty law intersect not only on substance, but also on procedure. PRI policies routinely instruct indemnified investors to seek, or to assist the insurer in seeking, legal recourse against host states, including through investor-state dispute settlement (ISDS). The compensation received through ISDS is then used to pay back the insurer. In addition, thousands of specialized subrogation treaties or subrogation provisions in broader investment agreements enable mostly the public PRI providers to step into the shoes of the insured to pursue recovery claims through ISDS against host states. Even though formal subrogation claims are rare, they form the backdrop of an active recovery diplomacy. PRI thereby challenges widely held views of the “depoliticized” nature of investor-state dispute settlement and often reserves a prominent role for the home state or multilateral insurer in the prevention and resolution of investor-state disputes.

PRI also connects with other areas of foreign policy and has emerged as a vital instrument for economic statecraft. PRI forms part of the toolkit that states and international organizations muster to achieve broader foreign and development objectives. PRI mobilizes capital for projects that private parties would otherwise not undertake. For example, coordinated war insurance by multilateral PRI providers and the G7 states helps channel investment into war-torn Ukraine.Footnote ⁴ PRI also supports economic development in high-risk states. Some of it, such as the G7-led Partnership for Global Infrastructure and Investment leverages PRI to present developing states with an alternative to China’s Belt and Road Initiative when it comes to financing infrastructure and energy projects. What all these projects have in common is that public PRI providers are willing to absorb higher risks, because their involvement is not primarily about generating returns but about fulfilling the organization’s development mandate or to achieve the home country’s strategic foreign and geopolitical policy objectives.

Finally, PRI is a creative legal tool that can shape outcomes that extend far beyond individual transactions. It is central to many of today’s most urgent global challenges, including sovereign debt restructuring, environmental protection and energy resilience. For example, by reducing investment risk, PRI enhances the feasibility of complex financing structures such as debt-for-nature swaps or blended finance initiatives. It allows capital to flow toward projects that support environmental, social, and developmental objectives—often unlocking funding in jurisdictions or projects otherwise considered unbankable. As a legal and financial instrument to de-risk transactions, PRI is thus a vehicle to align private capital with public goals and can support a wide range of policy objectives international lawyers and policymakers care about.

III. Mapping the PRI Landscape

PRI is provided through a range of institutional models—national government agencies, multilateral development banks, and private sector underwriters. Each operates with its own tools, mandates, and priorities, but all contribute to a broader effort to enable investment in high-risk environments.

National providers, such as the U.S. International Development Finance Corporation (DFC), represent one of the longest-standing approaches to political risk insurance. The DFC traces its institutional roots to the post-World War II reconstruction of Europe, when the United States first developed insurance tools to support private investment abroad through the Marshall Plan. The DFC’s predecessor, the Overseas Private Investment Corporation (OPIC), began providing PRI to U.S. investors in 1971. That legacy continues today in an expanded institutional form: the DFC now offers coverage for a similar broad range of political risks—including expropriation, inconvertibility, arbitral award default, and political violence—to both U.S. and non-U.S. investors, as well as international financial institutions. Operating under a dual mandate, the DFC supports private investment in developing and middle-income countries while aligning coverage with the strategic and developmental priorities of the U.S. government. These may include energy, infrastructure, and post-conflict stabilization. While anchored in U.S. foreign policy, the agency defines itself equally as a development finance institution—a dual identity that is shared by many other national PRI providers.

Multilateral providers, most notably the World Bank Group’s MIGA, evolved to complement national PRI schemes. Founded in 1988, MIGA’s legal design was heavily influenced by OPIC’s statute and programs, and it was developed in part by legal professionals with prior experience in U.S. government-backed investment insurance. However, MIGA’s orientation is distinct: as a multilateral institution governed by its member states and embedded in the World Bank Group, its primary objective is to catalyze foreign direct investment into developing countries in support of poverty reduction and sustainable growth. MIGA offers many of the same forms of political risk insurance as its national counterparts but structures its products to respond not just to investor needs but to developmental outcomes. For example, its capital optimization coverage allows international banks with subsidiaries in emerging markets to receive regulatory relief—on the condition that resulting capital savings are reinvested locally in target sectors such as small- and medium-sized enterprises or climate finance. Through such instruments, MIGA operates not merely as a risk mitigator but as a development intermediary, channeling financial advantages to achieve measurable impact.

MIGA also holds a distinct position within the World Bank ecosystem. Alongside the International Finance Corporation (IFC), which provides equity and debt financing to the private sector, and the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), which lend to sovereign governments, MIGA offers insurance and credit enhancement for cross-border investments that fall in either of these categories or a combination. It insures both private and public-private partnership projects and can provide sovereign non-payment guarantees in some cases. This institutional hybridity allows MIGA to support a wide array of development objectives while maintaining a core focus on risk mitigation for investors.

Private sector actors approach PRI from a different angle. For many investors, political risk is not something to be managed—it is something to be avoided. The default mitigation strategy is often to invest elsewhere. Where investments do proceed in riskier jurisdictions, PRI becomes one element in a broader portfolio of protections. Some firms treat coverage as essential, especially where internal governance, shareholder scrutiny, or lender requirements demand it. Others view it as an optional safeguard, weighed carefully against the cost of premiums and the probability of payout. PRI can also serve a presentational function—helping investment teams persuade corporate boards that political risks are understood and appropriately managed.

What emerges from this landscape is a convergence of purpose among diverse actors. Whether structured through a national agency, a multilateral institution, or a private insurer, PRI functions as a bridge between political volatility and investment viability. Institutional forms differ, but the objective is shared: to make capital available where it is most needed and least likely to flow unaided.

IV. PRI, International Law, and International Development

PRI overlaps with other distributive regimes of international law that reallocate legal and financial responsibility. PRI is most analogous to international investment protection treaties, which also de-risk investment flows by promising to compensate foreign investors in the case of adverse host state interventions. But whereas investment treaties require compensation by host countries, PRI shifts the risk burden, at least initially, to developed country home states: PRI state agencies from the Global North or multilateral institutions take on political risks associated with large investment projects that mostly take place in the Global South. While the insurers have every intention of ultimately being reimbursed by the host governments, so that the risk burden continues to lie ultimately with host governments, these arrangements in effect provide strong credit support for payment of the claim in the first instance. This makes investments possible that otherwise might not happen.

As an international development tool through which industrialized states subsidize capital deployment in developing states, PRI also operationalizes other international legal principles. For example, by co-financing green energy or nature conversation projects in poorer states, PRI is an expression of countries’ common but differentiated responsibilities when it comes to mitigating environmental harm. In short, PRI intersects with different international law regimes, which makes it important for international lawyers to better understand its role.

A first question that frequently arises is whether PRI and investment treaties offer overlapping or substitutable protections.Footnote ⁵ Both cover similar categories of political risk—such as expropriation, denial of justice, or currency inconvertibility—and both offer mechanisms for redress. Investment treaties do so through investor-state arbitration, while PRI offers contractual indemnification. This functional overlap has led some to suggest that PRI may be redundant in a world where investors already benefit from treaty-based rights. Yet this perspective fails to appreciate the fundamental distinction between the varying standards of protection and compensation processes.

Investment treaties tend to impose broader, vaguer, and more open-ended protection standards than PRI contracts. For example, unlike PRI, investment treaties require non-discrimination and fair and equitable treatment of foreign investors. Especially the latter standard has been interpreted by arbitral tribunals as offering broad protection against regulatory arbitrariness and is the most cited allegation in ISDS awards. PRI, in turn, provides coverage for more circumscribed events and omits protections for regulatory host state interventions that fall below the threshold of an expropriation or breach of state contract.

Although treaties tend to provide broader substantive protections, these standards tend to be harder to trigger and enforce. Investment treaties provide a legal framework for adjudicating disputes, but not necessarily for securing compensation. Even successful arbitral claims can take years to resolve, and enforcing awards against sovereign states can prove elusive. PRI, by contrast, offers liquidity. Once a covered event, which, in the case of breach of contract coverage, will typically include an unpaid arbitral award, is verified, the insurer pays the investor and assumes the burden of recovery. Whereas arbitration offers a right to pursue justice, PRI delivers financial certainty. The contrast is stark in practice. During the Asian financial crisis, for example, several foreign investors in Indonesia’s power sector obtained arbitral awards after government contracts were repudiated. But only one investor—backed by political risk coverage from the U.S. PRI program OPIC—received prompt compensation. OPIC’s payout to CalEnergy (later, MidAmerican Energy Holdings), at $290 million, remains its largest to date. Other investors, relying solely on arbitration, spent years seeking enforcement, often without success.

This distinction also underscores the complementarity between the two regimes. Rather than displacing investment treaty protections, PRI frequently builds upon them. Insurance providers typically include subrogation clauses that allow them to assume the investor’s legal rights once a claim is paid, potentially pursuing recovery through the very arbitration mechanisms investment treaties make available. In some cases, the existence of a bilateral investment treaty or equivalent legal instrument is even a precondition for issuing coverage. PRI thus leverages public international law to reinforce what otherwise looks like a private financial instrument.

At the same time, both investment treaties and PRI policies reflect growing sensitivity to the regulatory space of host states. Most PRI contracts include exclusions for bona fide, non-discriminatory measures of general application—such as environmental or health regulations—mirroring evolving treaty practice. This ensures that legitimate public interest measures are not inadvertently treated as expropriatory acts, thereby aligning PRI with broader legal trends aimed at reconciling investment protection with sustainable development.

The interaction between PRI and investment treaties also reveals how they collectively shift the burden of political risk mitigation. Unlike arbitration, which places the risk of enforcing an award on investors, PRI transfers that burden to public or multilateral insurers—who, in turn, may seek recovery from host states after paying claims. OPIC and its successor, the DFC, have collectively paid more than $1 billion in political risk claims and recovered 97 percent of those amounts. Capital-importing countries may thus end up facing both investor-state arbitration claims and home state recovery diplomacy. While OPIC’s high recovery rates reflect impressive institutional enforcement capacity, they also reflect that the costs of state actions triggering claims are, if the insurers succeed in recovering their claim payments, ultimately borne by those states, albeit less directly than other means such as investor-state arbitration. At the same time, PRI is partially conceived as international development assistance, particularly through the operations of multilateral actors like the World Bank Group. As part of that system, PRI is not deployed in isolation but coordinated with lending, technical assistance, and regulatory reform. MIGA, for example, works alongside the World Bank and the IFC to determine the most suitable financial instrument for a given development objective. In some cases, PRI may be the tool of choice—for instance, in insuring private lenders against sovereign breach of contract or regulatory takings. In others, it may be credit enhancement to enable complex publicly financed projects, such as climate infrastructure investments. Blended finance may also be used to further de-risk PRI instruments, for example, via first-loss layering, whereby concessional capital is first in line to absorb potential losses, enabling private and public insurers to cover the rest with reduced exposure.

This integrated approach reflects a broader shift in development finance—from fragmented toolkits to coordinated financial strategies. Rather than offering stand-alone insurance products, institutions increasingly operate as part of a development policy architecture that selects the right blend of instruments for the right context. PRI fits into this model as a bridge between private capital and public mandates: it enables commercially viable investment while safeguarding developmental goals.

Finally, political risk insurance also plays a strategic role in foreign policy in the case of national providers, which serve not only as insurers but as instruments of national statecraft. Insurance coverage can be tailored to support projects in geopolitically sensitive contexts, including post-conflict reconstruction, energy resilience, and critical infrastructure. Where private insurers retreat from high-risk environments, public agencies may step in. For example, in Ukraine, war risk coverage has been extended to both U.S. and Ukrainian companies—a departure from standard practice that illustrates the flexibility and policy responsiveness of public PRI.

Yet the use of PRI to advance foreign policy objectives must be balanced against development priorities and local sovereignty. Coverage that furthers strategic aims should not come at the expense of host state legitimacy or autonomy. The most effective PRI structures are those in which investor interests, host country development goals, and foreign policy considerations align—creating a shared rationale for risk mitigation and resource mobilization.

In sum, political risk insurance cannot be fully understood without reference to its legal, developmental, and diplomatic dimensions. It draws structure from international law, coherence from institutional frameworks, and strategic direction from foreign policy and development mandates. Its value lies not only in the risks it covers, but in how it mediates relationships—between states and investors, insurers and governments, law and finance—in the broader governance of international economic relations.

V. PRI, Sustainability, and the Energy Transition

Political risk insurance has traditionally served capital-intensive sectors like extractive industries and infrastructure. But as the global economy pivots toward decarbonization, PRI is being called upon to enable a different kind of investment: one that is high-risk not only in political terms but also in its alignment with long-term climate and development goals. In this emerging landscape, the central question is no longer whether PRI can protect investment—but whether it can help shape sustainable investment.

The paradox of the green transition is that the most ambitious climate projects are often located in jurisdictions with the highest political risk. Many developing and frontier economies hold the greatest potential for clean energy production—such as large-scale solar, wind, or green hydrogen—but lack the regulatory stability, policy coherence, or financial depth needed to attract private capital. For example, North African states like Morocco and Egypt offer optimal conditions for green hydrogen development, yet investment is often held back by concerns over currency inconvertibility, abrupt regulatory changes, or payment risk in state-backed offtake agreements.

PRI can be catalytic in such contexts. By insuring against losses stemming from such risks, PRI reduces the risk premium required for private participation. This is particularly crucial in blended finance models, where concessional funds from development banks are paired with commercial financing. In these cases, PRI not only backstops specific risks—it validates entire investment structures, making high-risk green projects viable.

At the same time, PRI is not automatically climate-aligned. While many public insurers now adopt environmental review processes, underwriting remains uneven. In some instances, PRI continues to support carbon-intensive infrastructure projects. The sector is only beginning to fully integrate sustainability criteria into risk assessment and policy eligibility. Germany’s PRI program provides an interesting case study in this respect. It introduced a traffic light system in 2023 that evaluates the climate-impact of eligible projects and excludes harmful projects from coverage.Footnote ⁶

At the same time, the energy transition also creates a deeper challenge for PRI by producing new categories of political risk that PRI is not always well equipped to handle. These include the political fallout of phasing out fossil fuel subsidies, public resistance to land-intensive renewable projects, and backlash against just transition measures. Regulatory volatility in decarbonization policies—such as the sudden withdrawal of feed-in tariffs or shifts in carbon pricing—can be just as destabilizing to climate investment as more traditional forms of expropriation or contract breach. These dynamics call for a redefinition of what counts as “political risk” in the twenty-first century.

Some insurers have begun to adapt. MIGA, for instance, has explored guarantee products tailored to just energy transitions. In Ukraine, war risk insurance has been extended by DFC not only to offshore investors but also to Ukrainian firms—a rare step that demonstrates the role public insurers can play in post-conflict reconstruction with sustainability dimensions. Looking forward, Just Energy Transition Partnerships in countries like South Africa or Indonesia offer another frontier for PRI innovation: these deals require assurances against political backlash and institutional instability as states move away from coal dependency.

Yet institutional change remains partial. Underwriting guidelines have not fully caught up with climate policy mandates, and, in many cases, PRI providers continue to operate without binding environmental, social, and governance (ESG) thresholds. There is also a lack of policy coherence across the climate finance ecosystem. While global climate institutions—such as the Green Climate Fund and Climate Investment Funds—deploy concessional capital to support green infrastructure, they are rarely integrated with PRI facilities at the project pipeline level. Shared taxonomies of sustainable investment, standardized ESG benchmarks, and coordinated risk mitigation strategies remain underdeveloped.

This disconnect is not merely technical—it limits the transformative potential of climate finance. Without coordination, private investors face duplicative procedures, mismatched incentives, and incomplete coverage. PRI could be more effective if it were deployed as part of a fully integrated climate finance architecture, one in which insurance, concessional capital, and public guarantees work in tandem to mobilize private investment at scale.

In sum, the energy transition is not just a technological or financial challenge—it is a governance challenge. It requires new tools to allocate risk, align incentives, and embed sustainability across legal and institutional domains. Political risk insurance can be one of those tools—but only if it evolves to meet the normative and material demands of a decarbonizing global economy.

VI. Looking Ahead: PRI in a Riskier, Multipolar World

The PRI industry is entering a period of growing demand and expanding mandates putting pressure on the system to evolve to meet emerging challenges. The PRI architecture—legal, institutional, and commercial—was largely built for a world of post–Cold War liberalization and predictable policy trajectories. It is now operating in a global landscape shaped by geopolitical fragmentation and overlapping crises, as well as social and environmental transitions. The fundamental challenge ahead is not just to scale PRI but also to adapt its governance, scope, and responsiveness for a new era.

Several priorities for future reform are emerging. First, PRI providers must become more agile and inclusive. A key innovation by the DFC in recent years has been the opening of coverage to include foreign-owned companies. Historically, OPIC was required by its statute to restrict coverage to U.S. investors. DFC’s new statutory authority under the BUILD Act allows PRI to be provided to companies whose investments contribute to the national interest, but that are not nationals themselves. That innovation is particularly important for sectors like critical minerals where production and refinement are dominated by a few countries, such as, first and foremost, China. Insuring foreign companies that invest in strategically important mining and processing projects abroad can yield direct positive repercussions for the economic security of the United States by building more resilient and diversified supply chains. In that vein, the G7 Critical Minerals Action Plan calls on “export credit agencies and development finance institutions (DFIs) to identify more opportunities for collaboration … and to enhance coordination on critical minerals projects.”Footnote ⁷

A second striking development is the rise of political risk in developed economies—a reversal of the traditional PRI focus on developing countries. Foreign investors increasingly face legal, regulatory, and political backlash even in stable jurisdictions. The case of TikTok, where a Chinese-owned company operating in the United States has been threatened with forced divestiture on national security grounds, exemplifies the blurring of economic policy, foreign policy, and national security in an era of political rivalry. Should PRI extend to protect foreign investors from adverse host state measures in developed countries? If so, what legal standards and institutional frameworks would apply? These questions signal a paradigmatic shift in how political risk is defined and where it is geographically located.

Third, given the rapidly changing global environment, there is a risk that PRI markets are not responding adequately quickly or flexibly. War risk coverage remains scarce outside a handful of public providers. Climate-related policy volatility is still not fully priced into underwriting models. And legacy practices—including opaque contracts, fossil fuel support, and weak ESG screening—persist despite mounting sustainability mandates. Relatedly, the offerings of PRI have remained relatively stable since its inception, which may create trust in existing products but also raises the question of whether new forms of PRI better adapted to twenty-first century concerns are needed.

Fourth, as the role of PRI grows, transparency, accountability, and international coordination become more important. The PRI industry continues to operate with limited public data on claims, dispute resolution, or recovery practices. Moreover, policy coordination among PRI providers could be strengthened. The Berne Union, as an industry association, provides a framework for public and private political risk providers to coordinate their practices. Yet, the ensuing transnational coordination remains industry-led and non-binding. That contrast with more formalized and government-led governance models in neighboring fields, such as the binding OECD Arrangement on export credits.

Finally, future-proofing PRI requires more robust engagement with host country development strategies. PRI might become more effective if it were to move beyond a model of investor protection toward a framework of shared risk management. This includes respecting domestic priorities, integrating local financial institutions into risk-sharing structures, and ensuring that risk mitigation instruments are designed with—not just for—recipient countries. In this regard, the convergence of PRI with Just Energy Transition Partnerships, national adaptation plans, and sustainable infrastructure pipelines offers a promising path forward—but one that must be built deliberately.

In sum, the PRI system sits at a crossroads. It can remain a specialized backstop for traditional capital flows—or it can evolve into a central pillar of national economic resilience and global sustainability. Meeting that challenge will require innovation not just in coverage, but in purpose.