AIG Ventures Into Political Risk Business in Southeast Asia.

A unit of American International Group Inc. has broken new ground with the opening of a Singapore-based service center for political-risk business in Southeast Asia.

The new AIU Insurance office is the first on-the-ground, private-sector political-risk operation in Southeast Asia, said Daniel Wagner, regional manager of Southeast Asia political risk for AIU. He added that "although the focus of the operation is Southeast Asia, the ability is there to service the rest of the region out of Singapore. This means as far east as Japan and as far west as the Indian subcontinent.

"I see a lot of interest in Indonesia and China for trade payment risk," Wagner said. On a geographical basis, he said, "Indonesia and China lead the pack, [then] the Philippines, Thailand and, maybe to a lesser extent, Korea and Vietnam."

Wagner stressed that "this is a demand-driven business, and the amount of trade and investment that goes into these countries" drives the demand.

AIU is offering coverage for both trade risks and investment risks.

Trade risks include issues such as contract repudiation or wrongful calling of on-demand bonds or guarantees, as well as exchange-transfer restrictions, war, export embargoes, license cancellation and nonpayment by governments or state-controlled institutions.

Covered investment risks include confiscation, expropriation and nationalization, which protects an investment against action by the host government. This can be endorsed to include currency inconvertibility, forced divestiture, forced abandonment, political violence and failure to honor a sovereign guarantee.