$700 billion bailout needs to be secured, says JLT

Latest findings from World Risk Review highlight increased economic risk for UK businesses operating in US

London, 2nd October 2008 - Increased levels of economic uncertainty, coupled with the possibility of a future sovereign ratings downgrade, has increased the level of risk for foreign businesses operating in the United States. This is according to the latest findings of the World Risk Review, a country risk ratings guide produced by leading specialist broker and risk consultant Jardine Lloyd Thompson.

"Following US politicians rejection of initial plans to a $700 billion bailout for bad debt, the United States is either already in or teetering on the brink of recession," says Doctor Elizabeth Stephens, Head of Credit and Political Risk Analysis at Jardine Lloyd Thompson. "And while the initiative has already been seen by many as putting a financial gun to the head of the ordinary American, a failure to bail out Wall Street will only weaken an already fragile US economy."

"Interestingly though, it appears little consideration has been given, to date, to the means through which the US government intends to fund this complex rescue venture. The administration has already made it clear that additional capital will not be secured through an increase in tax, while cuts in domestic spending are unlikely given current market commitments. Add to that the ongoing financial pressures of Iraq and Afghanistan and the future looks somewhat bleak. If the government intends to meet at least part of this cost through the sale of bonds, the million dollar question is - who buys them?"

Worryingly, as the rest of the world looks on, it is clear that the mortgage bailout is not enough. With mortgages only representing half of US consumer debt, requests for further government funding in 2009 look likely, further destabilising global markets. Future western financial market volatility is inevitable.

Meanwhile, in Russia, capital flight can be measured in billions of dollars as the economy continues to decelerate. Evidently the war in Georgia proved to be the final straw for many foreign lenders and investors to what was an already tense environment and with the stock market dropping by almost fifty percent, the region has quickly become a riskier and more expensive place to conduct business. Before the end of 2008 Russian companies are due to repay $45bn in international loans, creating further consolidation across many sectors and increasing non-payment risk.

Clearly what was initially a US financial phenomenon has spread and been supplemented by a series of other political and economic issues. Territories and Businesses around the world have begun to re-evaluate economic and country risk and mitigate against future financial unrest.

Designed to assist corporations, financial institutions and others involved in international trade and investment develop robust risk assessment strategies, the World Risk Review evaluates 197 countries, according to nine different perils, every month. The risk ratings model is regularly upgraded, downgraded and evaluated to provide a unique insight and analysis into individual countries and regions around the world.

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Editorial notes

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Jon Screech
Jardine Lloyd Thompson Limited
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About the World Risk Review
The World Risk Review was launched at Chatham House on 30th October 2007, the culmination of 12 months' research and development. It provides political and economic risk assessment in 197 countries and has been designed to help corporations, banks and others involved in international trade and investment develop more robust risk management strategies.

http://www.jltgroup.com/worldriskreview/

About Jardine Lloyd Thompson

Jardine Lloyd Thompson Group plc
The Jardine Lloyd Thompson group is a leading risk management adviser and insurance and reinsurance broker, as well as a major provider of employee benefit administration services and related consultancy advice. Jardine Lloyd Thompson Group plc is the largest European-headquartered company providing these services and is one of the largest firms of its type in the world. www.jltgroup.com

Jardine Lloyd Thompson Limited
Jardine Lloyd Thompson Limited provides insurance broking and risk consulting services to large and international companies around the world, or those requiring complex solutions. The majority of their 700 staff are based in London but they also have a number of other operations including the Middle East and Sweden.
Clients include many of the world's leading names and they are market leaders in a number of areas, including Construction, Communications and Technology, Life Sciences, Onshore and Offshore Natural Resources, Marine and Credit and Political Risk.
http://www.jltgroup.com/insurance-broker/