D
CONFIDENTIAL
R203
Mr. Benthiff
Compt mr v.s. Davies Whitthical
Homrw.s. Carter
Hoy King
Axt. 256
Dipt.
Then discuss
Dipt.
2nd June, 1967.
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World news at present is much concerned with dangers of The purpose of this letter la to draw attention to the consequenoss of this situation for E.C.G.E. oover, and to record how we propose to act.
war.
Virtually all guarantses that we issue over loss caused by war, revolution or civil disturbance in the buyer's country. Although we do our best to collect information about political factors and to take this into account when underwriting, in the kind of situation we now face in the Middle East, Rong Kong and Nigeria both the collection and the assescment of information is very difficult. We cannot pretend that our 'commercial judgment of the war rink is either sophisticated or scientific,
463
In practice, wo must rely upon a broad judgment, taken in consultation with the Advisory Council and based on all the advice ot ur Departments are able to provide, that the risks of war or civil disturbance in any given market are not so tangible or inmediate to precluda further cover under Section 1. In the same way, wheI J starding authority, e.g., a market limit, exists for Section 2 ouvir, we a vuld normally assume that this remains open for use in the upaunce of an explicit instruction from the Treasury, taking account of the vians of other Departments, that the war risk is no longer acce table.
Clearly the biggest risks are in the Kiddle East and here ws shall be particularly cautious about taking on further large pro- ¿ncta – althou⋅h it should be borne in mind that in Syria, Jordan and dept we already have strict limits on the business we will cover and in Israel itself there has not yet been time for the recently agreed line of credit to produce concrete business. The other are alonest to war ia Nigeria where we are off cover (except, in theory, on a matching basis) for all except short term business. The problem in Hong Kong, though different in form, is hardly less difficult. (Fawlings wrote to Carter about the tunnel: project on 19th May.)
Historically, we have continued to cover war risks in times of stress and we think that this is probably the right thing to do now, coúpi d of course with close underwriting coutrol. Accordin, Lý và Hàn are not at present proposing to recommend to the Advisory Council any further suspension of Smotion 1 acver on any of the markets I have mentioned. If any move of this kind appears to us to be ilant, Departments will need to consider whether Section 2 cover should be made available.
I am copying to Fell, Hancock, Shannon, Morris and Ryan.
J.G. Owən, Osq.,
Treasury Chumbers,
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Great George Street,
London,
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