Specialty insurer Mosaic Insurance has introduced arbitration award default insurance (AADI) in the US, with a global capacity of $65m.  

The coverage is designed to safeguard against the risk of non-payment by sovereign states in the event of investment treaty breaches or contractual obligations.  

AADI is particularly relevant for project companies or investors that seek to resolve disputes through international arbitration but may struggle to collect funds from defaulting sovereign counterparties. 

It compensates parties for the non-payment of arbitration awards, addressing the challenges faced when a respondent state fails to honour its financial commitments.  

Mosaic’s new offering includes both pre-award and post-award coverages, with a capacity of $65m per risk and term provisions of up to five years, extendable on an individual basis.  

This insurance solution is key for managing the risk of non-payment, especially in high-stakes disputes or when dealing with states known for financial defaults. 

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The benefits of AADI extend to managing uncertainties for claimants and litigation funders in international arbitration.  

It allows businesses to monetise potential earnings from arbitration awards, either before or after the award is rendered, particularly in cases of sovereign default.  

The coverage protects the full or partial value of the award and safeguarding against administrative and financial losses during arbitration or enforcement proceedings. 

Mosaic political risk division leader Tamar Katamadze said: “Arbitration award default insurance revolutionises the landscape for claimants, law firms and litigation funders engaged in international arbitration.  

“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.” 

In addition to AADI, Mosaic’s division also provides political risk/contract frustration and credit risk coverage on a global scale.  

Political risk insurance is one of the seven specialty lines that Mosaic underwrites, which also includes cyber, environmental liability, financial institutions, political violence, professional liability and transactional liability. 

Earlier this month, the company expanded its offerings to include primary technology errors and omissions coverage, with an aim to protect tech companies from the liabilities of providing tech products.