Overseas projects will often need to obtain insurance coverage to receive financing from banks. This includes liability insurance in case there is an accident during construction. Projects that are in high-risk sectors and areas will also require risk insurance, which covers both political and commercial risks, such as war, breach of contract and expropriation. There are many companies across the world that provide project insurance, but the largest Chinese actor in this field is the China Export & Credit Insurance Corporation (Sinosure). Sinosure has provided insurance for projects including the Sihanoukville Special Economic Zone and Lower Sesan 2 Hydropower Dam in Cambodia, the Thang Long Coal Power Plant in Vietnam, and was expected to insure the Lamu Coal Power Plant in Kenya, before the project was ultimately canceled.
Sinosure is state-owned and provides risk insurance to support exports and overseas investments. It is one of the official export credit agencies (ECA) of China. Sinosure provides various insurance and guarantee services that enable projects to secure financing. For example, in the case of complex and high-value projects, such as power plants, Sinosure may provide overseas investment insurance to either the Chinese bank that is providing the loan for the project, or to the company that is investing equity in the project.
Sinosure can also provide insurance for projects that are contracted to Chinese companies. For example, it can provide insurance to a contractor in case the project does not move forward as planned or if the project owner does not pay the contract fee.
This type of insurance is a very important protection for companies and banks operating in risky or uncertain environments overseas. Chinese companies and banks may seek insurance from other commercial insurers, but many Chinese banks require Sinosure underwriting before providing credit for overseas projects. This makes Sinosure a very important actor in Chinese global investments, and Chinese banks may reject financing for a high-risk project if Sinosure decides against providing insurance.