Bermudian-based Mosaic Insurance has expanded its political risk coverage to the US market and launched global capacity of $65 million in arbitration award default insurance.

AADI is a product that compensates parties against breaches of investment treaties or contractual obligations by sovereign states.

Project companies or investors often turn to international arbitration to resolve disputes efficiently and cost-effectively, but even after an arbitral award in their favour, they can face considerable challenges when attempting to collect awarded funds from defaulting sovereign counterparties, Mosaic said.

The company added that non-compliant governments or unforeseen financial or political environments in host countries can lead to award defaults, leaving the victorious party empty-handed and in need of costly legal remedies.

“Amid geopolitical and economic turbulence, AADI is an increasingly relevant product that protects investors against sovereign default and enforcement risk when navigating the complexities of claims in international arbitration,” said Finn McGuirk, global head of Political Risk at Mosaic.

“We’re pleased to offer this innovative coverage among our suite of products.”

AADI protects a claimant against a respondent state’s failure to pay an award rendered against them.

Mosaic offers both pre-award and post-award coverages, with capacity of $65m per risk and term provisions of five years for insureds, with an opportunity of extension on a case-by-case basis.

Mosaic said benefits include:

• Managing the risk of non-payment of an arbitration award - particularly important if investors are involved in a high-stakes dispute, or if a sovereign state has a history of defaulting on financial obligations;

• Reducing uncertainty for claimants and litigation funders involved in international arbitration;

• Enabling businesses to monetise award-related earnings either prior to the award being rendered or during the enforcement stage following sovereign defaults; and

• Offering comprehensive coverage for the full or partial value of the arbitral award, safeguarding businesses from administrative and other financial losses at the stage of arbitration or award enforcement proceedings

“Arbitration award default insurance revolutionises the landscape for claimants, law firms, and litigation funders engaged in international arbitration,” noted Tamar Katamadze, who leads the product for Mosaic’s political risk division from New York.

“This solution provides clients with the ability to navigate both duration and liquidity risks through every phase of arbitration proceedings or in recognition and enforcement of arbitral awards.”

As well as AADI, the division offers political risk/contract frustration and credit risk coverage globally.

Political risk is one of seven complex lines of specialty business Mosaic underwrites.

The firm also offers coverage for transactional liability, cyber, political violence, environmental liability, financial institutions, and professional liability.