Insurance Marketplace Realities 2027 – Political Risk

Despite heightened geopolitical tensions and some increase in claims activity, the political risk and trade disruption insurance market remains well-capitalized entering 2027, supported by a broad mix of commercial insurers, export credit agencies and multilateral providers. Losses associated with Iranian retaliatory attacks, trade disruption arising from the effective closure of the Strait of Hormuz and ongoing conflict-related exposures have tested market capacity, yet competition for high-quality risks remains healthy, particularly for medium risk emerging markets inquires, investment-grade counterparties and well-structured transactions. Capacity remains generally available across most political risk perils, although underwriting appetite has become more selective. In particular, a growing number of insurers are showing a preference for single-country risks, while multi-country and global portfolios are attracting greater underwriting scrutiny due to concerns around risk aggregation, sanctions exposure and the increasing potential for correlated geopolitical events.

The U.S.-Iran conflict, disruption of traffic through the Strait of Hormuz and the continuing war in Ukraine remain among the most significant geopolitical developments influencing multinational corporations and political risk insurers. Despite losses arising from Iranian retaliatory attacks on regional assets and trade disruption associated with the effective closure of the Strait of Hormuz, the market has remained resilient and adequately capitalized. Looking ahead, both insureds and underwriters are increasingly focused on second-order effects, including higher energy and commodity costs, inflationary pressures and economic strain across import-dependent economies in Asia, Latin America and Africa. There is also increasing awareness of other supply chain chokepoint vulnerabilities. Continued concerns regarding potential spillover from the war in Ukraine into Poland and the Baltic states, as well as persistent geopolitical tensions involving China and Taiwan, are also shaping risk assessments and underwriting strategies.

Beyond these headline risks, underwriters continue to monitor rising sovereign debt burdens, fiscal pressures, social unrest and resource nationalism across a number of emerging markets. In Latin America, political transitions, regulatory uncertainty and government intervention in strategic sectors such as mining, energy and infrastructure remain areas of focus for investors and insurers alike. Across Africa, concerns regarding political violence, insurgent activity, election-related instability, currency volatility and debt sustainability continue to influence underwriting appetite and pricing. These developments are contributing to increased demand for protection against expropriation, contract frustration, currency inconvertibility, sovereign nonpayment and political violence.

Political risk pricing remains disciplined, but capacity is generally available. The primary exception is political violence coverage in the Middle East, where many insurers have restricted or suspended new business while continuing to offer capacity for other perils. While geopolitical uncertainty remains elevated, growing market capacity and strong insurer balance sheets continue to support competition for well-structured risks. As a result, most buyers should experience only modest rate increases, with pricing pressure concentrated in regions and sectors exposed to conflict, political violence, trade disruption and strategic supply chain vulnerabilities.