Political Risk Insurance Outlook: Still a Buyer’s Market
From anti-establishment and nationalist movements in the West to conflicts among global and regional powers, political risks appear set to intensify in 2017. For multinational businesses, geopolitical instability could have significant impacts, including influencing decisions about where to assign people and invest resources. But despite growing risks, there’s some good news: Political risk insurance generally remains accessible and affordable.
Geopolitical Risk Concerns
In 2016, the United Kingdom voted to leave the European Union and Donald Trump was elected US president. These events represented twin shocks across the West, but they’re also part of a broad rise of populist movements. In many countries, people are looking for political change. Frustration and anger at existing governments and institutions is feeding anti-establishment and nationalist sentiments that will likely intensify in 2017, with significant societal and economic implications for multinational businesses.
At the same time, we’re also likely to see greater rivalries and tensions globally in the year ahead. The Trump administration is expected to take a more assertive approach to foreign policy than the Obama administration. China, meanwhile, has been more aggressive the last several years, especially in the South and East China Seas, raising tensions with Japan and South Korea. And Russia has taken a more forceful stance in surrounding countries while intervening in Syria, creating tension with many other global and regional powers.
Global businesses will also need to watch for succession risks following critical elections scheduled this year in China, France, Germany, Hong Kong, Iran, and South Korea.
Insurance Coverage Readily Available
Despite rising geopolitical risk globally, the market for political risk insurance is still quite favorable to buyers. Globally, nearly 60 insurers currently offer political risk coverage, creating significant competition and giving buyers many choices.
There are some countries where coverage could be difficult to obtain. For example, insurers are concerned about their exposure to Turkey and are generally not willing to offer much new capacity there. New capacity is also limited for Russia, where the US and EU have imposed sanctions. And coverage is nearly impossible to obtain in Afghanistan, Libya, Syria, Somalia, Ukraine, and Venezuela.
But these countries are exceptions rather than the rule — and coverage even for some of these countries can be obtained through a multi-country policy. Multi-country policies can provide coverage for a list of specific countries in which a company operates, and are usually available at attractive rates and with favorable terms, including broader definitions and multi-year coverage.
Although political risk remains high, multinational businesses can build effective insurance programs to protect their assets around the world. Work with your insurance advisors to understand your specific political risks and build an insurance program to address them.
For more information, explore Marsh’s interactive Political Risk Map 2017 or listen to a replay of Marsh’s New Reality of Risk webcast.