Political risk insurance, CSR and the mining sector : An illustration of the regulatory effects of contracts

Purpose – The aims of this paper are: to explore the nature of political risk insurance (PRI) contracts as a form of regulation in the context of mining projects in developing countries; to examine how PRI providers factor corporate social responsibility (CSR) policies and practices of applicants in their initial decisions to provide PRI; to examine how CSR criteria are reflected in the terms of PRI contracts; to understand how failure to exercise good CSR practices by recipients of PRI affects insurance coverage; to shed light on how good CSR practices which minimize risk to companies and communities can be or are rewarded through PRI contracts; to identify opportunities for reform. Design/methodology/approach – This article adopts a conceptual approach through analysis of the practical effects and public policy implications associated with use of PRI contracts as a regulatory mechanism to promote good CSR practices. Findings – PRI contracts represent a form of proactive risk management used by investors. Because of the significant regulatory effect of the CSR provisions of PRI contracts provided by state‐based agencies, there is considerable potential for and value associated with greater transparency in the implementation of such contracts. Originality/value – This article sheds light on the regulatory dimensions associated with the CSR provisions of PRI contracts. This represents a new contribution to the literature on CSR contracts, which until this point has focused largely on the CSR aspects of supply chain contracts.