CHICAGO, July 24, 2006 -- A giant step in the wrong direction. That's what the current Middle Eastern conflict represents to Lebanon, which, according to an Aon Political Risk expert, had shown signs of "turning the corner," recently becoming more attractive to investors and underwriters.
That's not the case now, says Roger Schwartz, senior vice president of Aon's Trade Credit practice in New York. "Lebanon so far has been the big economic loser. Underwriters had developed a level of comfort in Lebanon recently," he says. "Transactions that wouldn't have been considered two years ago had been able to get support from private sector underwriters."
Schwartz says this is a significant step backward for Lebanon, whose reputation for international investment had been obliterated during and in the years after the Lebanese civil war in the 70s and 80s. Beirut had been left in ruins after the conflict and the country's reclamation took more than a decade. Now, Schwartz says "there will be much work going forward even after the shooting stops." He says this just reinforces the need for hedging a company's potential risk in a region like the Middle East that is considered to be inherently unstable. Schwartz says companies can take risk mitigation steps to keep their bottom lines from tanking."
Case in point, he says, if a company owned a freight forwarding business in the port of Beirut or the local airport -- both of which have taken their share of hits from recent rocket attacks -- and its facilities were damaged, the economic loss might not be recoupable. Physical damage is not normally covered under a property policy. Political risk insurance, he says, could fill that coverage gap.
Schwartz says the big concern for underwriters now is an escalation of the conflict into Syria and other Middle Eastern countries.
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