Insurance Marketplace Realities 2023 – Political risk

Since the beginning of the Russia/Ukraine crisis, there has been a spotlight on PRI which has led to increased interest from multinational corporations’ risk managers, often directed by their C-suites.

• The political risk insurance marketplace has risen to the occasion, with many claims ongoing in both Russia and Ukraine. WTW has supported many clients with claims from political violence (damage to property), forced abandonment (a non-damage situation which results in the client abandoning their operations due to a security situation, which has been common in the Donbass region and in Russia), and currency inconvertibility (as the Russian government has closed the foreign exchange window for many companies, harming their ability to remit dividends, pay off intercompany loans, or repatriate proceeds of a divestiture).
• Given the media coverage of the crisis in Ukraine, PRI has garnered strong interest from the media given war exclusions under other insurance programs and the need to explain to readers where war and political risk coverage can be found.
• The tensions between China and Taiwan/U.S., and the U.S. sanctions and restrictions on U.S. citizens working for Chinese companies in the semi-conductor industry, has awoken many U.S. companies to political risk in China. Xi Jinping’s appointment to lead China for a third, precedent-breaking, term and stacking the Politburo with allies is also concerning for many multinationals.
• The spate of coups and attempted coups in West Africa has continued, with a failed coup attempt in Mali and a successful coup in Burkina Faso.
• The U.S.’ rapidly tightening monetary policy has led to the strongest dollar in decades. This has led to increased inflation in the rest of the world, especially in developing countries that rely on imported food/fuel, as these commodities are traded in dollars. High food inflation in particular puts many developing countries, especially in the Middle East and Africa, at risk of social unrest.
• Clients seeking to differentiate their risks must focus on incident reporting, claim mitigation, policies and procedures. Emphasis on the clinical program management will also have a positive impact, particularly those with a focus on fall management, elopement, medical management and infection prevention and control.

We are following several trends in the political risk insurance marketplace.

London market: Little appetite for multi-country PRI. The remaining appetite is going for higher rates.

U.S. market: More appetite for PRI, especially multi-country PRI, than the London markets. In the recent past we were able to negotiate CEND triggers for business interruption, though in the tightening market, fewer markets are amenable to this enhanced cover.

Country capacity update: Most underwriters are closed to Russia and Ukraine in new PRI programs. Some underwriters are open to Taiwan and Turkey, though capacity is severely limited, and pricing reflects that.

• With the market tightening, when attempting to place a large multi-country PRI program, there is a greater need to create innovative layering and syndicated approaches to muster as much capacity as possible.
• Market conditions are increasingly challenging for certain sectors, such as technology (especially semi-conductor companies) and retail.
• For clients in sectors/countries that are particularly challenging to place now, we advise that, if the markets do not support the size of the program they’re requesting, they purchase what they can get now. The PRI marketplace emphasizes loyalty, so those that purchase programs will be front-of-line once capacity loosens.