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Event of loss

Any impairment of the rights of a German investor - whether in part or wholly - constitutes an event of loss. Any impairment of the assets of the company in the host country can constitute an event of loss only if due to such act (deprivation, destruction) the project cannot be continued without losses in the long run.

As soon as the investor anticipates a political risk he must immediately inform PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft. At this early stage loss prevention measures will be initiated by diplomatic channels. The objective is to save the continuity of the investment. Unlike property insurance the German government does not wait until the loss has actually occurred but becomes active at an early stage.

In the case of loss, the indemnification to be paid by the German government is calculated on the basis of the evidence provided by the insured. The indemnification is to compensate the insured for the loss which he incurred. In calculating the indemnification, the gross loss is taken as a basis, i.e. the current market value of the investment at the time of loss, though not more than the covered contribution value.

The process of determining the indemnification starts with a plausibility check on the basis of the balance sheets and profit and loss accounts of the project company provided by the investor. If the claimed loss is higher and the actual value of the investment and therefore the accuracy of the claimed loss is doubted, the investment has to be assessed by applying measures accepted by business management. The resulting value serves as a basis for the calculation of the indemnification.

The amount of indemnification is reduced by the uninsured percentage of generally 5% to be borne by the insured.

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