Sovereign Risk Insurance Ltd, the Bermuda-based political risk insurance joint venture between ACE Limited and XL Capital Ltd, has announced that it is offering a new political risk insurance product for long-term loans between countries.

The specially tailored new capital markets product covers bond offerings by emerging market issuers against currency inconvertibility and currency nontransfer risks in the country of the issuer.

The capital markets political risk insurance is designed to enable issuers in emerging markets to achieve higher foreign currency ratings from ratings agencies on the insured bond offerings.

With the higher ratings, the issuers will be able to attract funding from a broader range of investors while reducing their financing costs.

Sovereign has per-project limits of $125 million and is able to provide tenors out to 15 years, making this coverage particularly well suited for cross border 144A bond offerings and private placement.

Price Lowenstein, Sovereign's president and chief executive officer, said: "By adding our political risk coverage to the structure of bond offerings and removing the currency inconvertibility and currency nontransfer risks, many emerging market issuers will now be able to obtain an investment grade rating, regardless of the rating of the issuer's country. This will be a valuable enhancement feature for project and corporate bond issuers in the emerging markets.'' Sovereign is already considering several transactions that would benefit from this coverage.

Sovereign, formed in July 1997 to underwrite political risks on behalf of ACE Bermuda Insurance, Ltd. and XL Insurance Ltd, has rapidly become one of the world's leading political risk insurers and reinsurers.

Sovereign's portfolio now exceeds $3 billion of exposure spread over 60 emerging markets.