2016: Geopolitical risk comes home

On the morning of June 24, 2016, the United Kingdom woke up to a referendum result the markets had not priced in. By a margin of 52% to 48%, voters had chosen to leave the European Union. Sterling fell to its lowest level against the dollar in 31 years within hours of the result, and more than $2 trillion was wiped off global equity markets in a single trading session – the worst one-day loss on record at the time.

For the insurance and advisory industry, the more telling statistic was a different one. Political risk models built over the preceding decades had been designed almost entirely around instability in emerging and frontier markets – expropriation in Venezuela, currency controls in Argentina, coups in West Africa. Few had been built to quantify the consequences of a G7 economy voting to unwind four decades of regulatory, trade, and legal integration with its largest trading partner.

A vote that exposed more than a currency

Most of the immediate impact from Brexit was financial-market volatility, which proved temporary; sterling and the FTSE both recovered within weeks. The deeper and more persistent impact was structural. Companies with UK and European operations faced years of uncertainty across supply chains, workforce mobility, regulatory equivalence, and contract law, with no fixed timeline for resolution.

Brexit (2016), the first Trump presidency (2017) and the ensuing US-China trade war (2018) did not simply expose a failure of political forecasting – many analysts had flagged the possibility of a close result. The bigger challenge was translating political uncertainty into measurable business consequences: what does regulatory divergence from the EU do to a company's balance sheet? What does a tariff war mean for its supply chain?

Political risk insurance had long been priced almost exclusively for developing and emerging markets. The rise of European populism and protest movements began pushing political risk into markets that had rarely needed this kind of coverage. Assessing this risk in an economy like the UK required something different from expropriation and currency-inconvertibility models built for the emerging world: continuous monitoring of electoral and regulatory trends in mature democracies, translated into financial terms that multinational treasurers and boards could act on.

Building a new approach to political risk

The challenge of translating geopolitical uncertainty into measurable business risk had already attracted attention across Willis.

A joint venture between Willis and Oxford Analytica had resulted in the launch in 2015 of a political risk model VAPOR (Value at Political Risk), the first model to quantify the financial impact of political risks. The novel approach enabled multinationals to assess and compare the financial implications of six types of political risks across 11 industry types in 100 countries.

Sam Wilkin (now director of political risk analytics at Willis) explained how “Inspired by the catastrophe modelling industry, VAPOR took a probabilistic approach that assesses whether a particular society is more or less vulnerable to experiencing a suite of discrete political contingencies over time and then estimates the possible cost, over time, of these contingencies to business. This gives businesses the ability to evaluate the costs of geopolitical risks when deciding in which industry and country to invest.”

This later led to the launch in 2019 of a $1b facility supported by this innovative modelling.

From 2017, WTW and Oxford Analytica began publishing an annual Political Risk Survey, tracking how businesses experienced and responded to political risks around the world.

Our research programme into longer-term geopolitical risks also expanded, helping clients make sense of shifting geopolitical dynamics and their impact on business models and strategy. Our collaboration with Elisabeth Braw started in 2019, when she pioneered research into hybrid warfare and gray-zone aggression at the Royal United Services Institute. Spotting those trends before they directly affect our clients remains an important part of the WRN mission. This 2026 WRN report outlines realistic gray-zone scenarios with multi-sectoral impacts.

When geopolitics becomes everyone’s risk

More than a decade on, the political risk practice that emerged partly from that period has broadened considerably beyond its original brief. By 2019, a WTW study of 41 large multinationals found that 68% of respondents had experienced a political risk loss, with 54% reporting losses from political violence, compared to 48% in 2018.

Russia’s invasion of Ukraine, growing strategic competition between the US and China, conflict in the Middle East and the increasing use of sanctions, tariffs and export controls have pushed geopolitics much further into everyday business decision-making. Political risk is no longer confined to elections, instability or individual countries. It increasingly shapes where companies invest, how they structure supply chains, which technologies they can access and even where critical resources come from.

The boundaries between different forms of risk are also becoming harder to separate. Competition over semiconductors and artificial intelligence is reshaping technology risk. The energy transition is increasing the strategic importance of critical minerals and the countries that control them (our collaboration with Dr Cullen Hendrix at the Peterson Institute for International Economics). Climate change is interacting with migration, food and water security, while economic security policies are reshaping global trade. Gray-zone aggression is increasingly targeting critical infrastructure, supply chains, data, and corporate reputations without crossing the threshold of armed conflict. These tactics blur the boundaries between political, technological and commercial risk. For businesses and insurers, understanding geopolitical risk increasingly means understanding how these forces intersect – and where disruption might travel next.

The analytical challenge has evolved with it. In 2016, the question was how to translate an unexpected political outcome into financial consequences. Today, businesses are increasingly trying to understand how multiple political decisions and geopolitical shifts might interact across markets and their operations. Geopolitical risk is becoming harder to isolate as a standalone exposure: the next generation of political risk research will need to understand not only where disruption originates, but how its consequences travel through markets, technologies and interconnected global systems.

Key takeaways

• Brexit exposed a major shift required in political risk modelling, showing that advanced economies could generate significant political and regulatory disruption. While market volatility was short-lived, prolonged uncertainty over trade, regulation, and legal frameworks demonstrated the need to translate political developments into measurable business and financial risks.
• The WRN helped build a broader approach to understanding geopolitical risk. Through research partnerships and analytical tools such as VAPOR, Willis increasingly combined political expertise, research and analytics to make complex geopolitical risks more manageable.
• A decade later, geopolitical risk is becoming harder to isolate. Trade policy, technology competition, critical minerals and economic security increasingly cut across markets and industries. The next generation of political risk research will need to understand not only where disruption originates, but how its consequences travel through interconnected global systems