VZCZCXRO4486
PP RUEHROV
DE RUEHJM #2230/01 3470747
ZNR UUUUU ZZH
P 120747Z DEC 08
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC PRIORITY 3497
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 JERUSALEM 002230 
 
SENSITIVE 
SIPDIS 
 
NEA/IPA FOR GOLDBERGER/LENTZ; EEB/IFD/OIA FOR CULLINANE; 
TREASURY FOR AHERN 
DEPT PLEASE PASS TO OPIC FOR VP RODNEY MORRIS 
DEPT PLEASE PASS TO USAID FOR ME/MEA: NANDY/BORODIN 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV KWBG IS
SUBJECT: OPIC PROMOTES POLITICAL RISK INSURANCE TO THE 
PALESTINIAN MARKET 
 
REF: JERUSALEM 916 
 
¶1. (SBU) Summary:  Overseas Private Investment Corporation 
(OPIC) officials discussed the Palestinian Political Risk 
Insurance (PPRI) project during a visit to Jerusalem and 
Ramallah in early December. PPRI, announced during the May 
2008 Palestine Investment Conference in Bethlehem (reftel), 
would indemnify Palestinian exporters for penalties and fees 
incurred if products are delayed or damaged due to border or 
checkpoint closings or procedures.  OPIC, in partnership with 
the Middle East Investment Initiative (MEII), aims to make 
the product available to West Bank businesses in mid-2009. 
End summary. 
 
¶2. (SBU) OPIC Vice President Rodney Morris, James Williams, 
and Eric Jowett visited Jerusalem and Ramallah December 2-5 
to advance the PPRI project, a partnership between OPIC and 
MEII to provide political risk and trade disruption insurance 
for West Bank exporters.  The project is designed to protect 
against losses, including those suffered due to closings or 
delays at Israeli checkpoints or commercial crossings. 
OPIC's product is expected to be bundled with a traditional 
insurance policy that covers damage done to goods in transit. 
 The insurance will be offered initially in the West Bank 
through the National Insurance Company (NIC), with the goal 
of including additional Palestinian insurance companies in 
the future.  OPIC will reinsure NIC for most of the losses 
sustained under the program.  OPIC believes affordable 
political risk insurance will enable Palestinians to expand 
export markets, generating additional business, and promoting 
job creation. 
 
Palestinian traders don't do traditional business deals 
--------------------------------------------- ---------- 
 
¶3. (SBU) Business representatives emphasized the informal 
nature of business arrangements undertaken by West Bank 
exporters, given ongoing restrictions on the movement of 
goods within the West Bank and to Israel.  OPIC noted that 
these informal arrangements present significant challenges in 
designing a trade disruption insurance policy.  While a 
policy would normally insure against penalties or late fees 
assessed due to delay and/or damage, exporters told OPIC they 
rarely sign formal contracts with their buyers, and entirely 
avoid deals that involve late fees. 
 
¶4. (SBU) Exporters also shy away from large-scale, long-term 
contracts (which are the most profitable) because of the 
uncertainties.  Other traders said they do not begin 
negotiations on the final price of the goods until the 
shipment arrives at its destination and the buyer assesses 
the damage or delay.  One businessman said that PPRI might 
give him the confidence to seek out formal contracts with 
larger companies that would involve penalties, and that he 
could easily fulfill such orders.  However, he said the 
credibility of his business remained his priority, and he 
would remain hesitant to take on larger deals without more 
consistent, formalized practices at the commercial crossings. 
 
Damage and delay 
---------------- 
 
¶5. (SBU) Although the rates vary by sector, shippers told 
OPIC that, on average, 10 percent of goods are damaged while 
going through the crossings.  Agricultural producers did not 
report significant damage, but noted that delays at the 
crossings directly impact the shelf life and therefore the 
quality and value of their goods.  OPIC noted that under the 
current system (with no third-party monitor), it could be 
difficult to determine whether the damage actually took place 
at the crossing or during other parts of the journey. 
 
If we build it, will they buy? 
------------------------------ 
 
¶6. (SBU) Traders and insurance contacts alike stated that 
increased awareness and education about insurance and the 
PPRI would be key to its success.  They also noted that the 
restrictions on Palestinian movement and access have doubled 
or tripled the cost of exporting in recent years, and that 
they must carefully consider whether purchasing additional 
insurance is cost-effective for them. 
 
¶7. (SBU) OPIC's efforts to advance the PPRI project follow 
 
JERUSALEM 00002230  002 OF 002 
 
 
the re-formulation of the World Bank's Multilateral 
Investment Guarantee Agency's (MIGA) political risk program. 
In early November, MIGA extended guarantee coverage to local 
(Palestinian) investors in addition to foreign investors, and 
expanded the program to cover existing investments with 
sufficient new capital.  MIGA's product does not cover 
political risk and/or damage or delay at crossings and 
checkpoints. 
 
¶8. (U) Based on their discussions during this visit, OPIC 
will work with MEII to determine if the product as currently 
designed should be offered broadly in the West Bank, or 
limited to specific sectors.  OPIC will also continue 
discussions with NIC and others to determine whether the 
product can be broadened to enhance its value and 
marketability.  OPIC aims to have these matters finalized by 
the end of the first quarter of 2009. 
 
¶9. (U) OPIC has cleared this message. 
WALLES