A type of political risk insurance that pays a proportion of the
contractor's start-up costs that may not be recoverable from the
purchaser/employer in the event that an overseas contract is not finalized for
reasons outside the contractor's control. It is common practice for
contractors/sellers to place orders and mobilize a plant at site as soon as a
foreign contract is signed. However, if at this stage certain conditions remain
to be fulfilled before a contract becomes binding upon both parties, the
contractor/seller could be liable for all expenses so incurred should the
conditions precedent not be met, and the contract is, therefore, never
ratified. Contract ratification indemnity coverage is designed to insure this
exposure.