You Need Insights into Global Risks? Gallagher Has Some Answers

Risk is a fluid thing, it changes on a daily basis, as the recent spread of CoronaVirus demonstrates. With this in mind, it’s good to keep tabs on global trends and the latest data. Here’s some news from Gallagher;

The Structured Credit and Political Risk Market Update from Gallagher, one of the world’s largest insurance broking, risk management and consulting services companies, compiles credit & political risk commercial insurance capacity from across insurers in the market. The latest report evidences high levels of confidence, despite challenging increased global political and economic risks.

Looking at each insurance class, capacity has changed January 2019 to January 2020 as follows:

·         Political risks up 3.1% to $3,189 million

·         Trade risks (sovereign) up 1.8% to $3,123 million

·         Trade risks (commercial) – up 3.9% to $2,475 million

·         Non-trade – up 11% to $1,752 million

Over the past 10 years, market capacity for political risks has risen 137%, trade risk (sovereign) 175%, and trade and risks (commercial) 252%.

This significant expansion of available cover means that investors are able to expand their portfolios and assets in territories where previously they may have felt unable to do so. It also reflects the growing maturity of this insurance market, as investors demonstrate increased confidence in this type of cover, and the risks it can help mitigate.

Market capacity has risen despite a period of heightened emerging market risk, driven by:

·         Anti-incumbent political sentiment across Latin America, with regime change in Bolivia, Argentina, Uruguay, and mass protests in Ecuador and Chile threatening stability across the region.

·         Increasing civil unrest across the Middle East and North Africa region. Iraq, Lebanon, and Algeria have all seen significant strikes, protests and violence, alongside corruption, unemployment – particularly of young people, and a distrust of political regimes look set to continue to fuel the widespread discontent.

·         Deteriorating current account balances in oil-producing and extractive focused nations, and exchange rate and budget balance pressure for those nations with high USD debt.

·         Increasing civil unrest across the Middle East and North Africa region. Iraq, Lebanon, and Algeria have all seen significant strikes, protests and violence, alongside corruption, unemployment – particularly of young people, and a distrust of political regimes look set to continue to fuel the widespread discontent.

Matt Solley, Managing Director of Credit and Political Risks at Gallagher, said: “The data in our latest report is encouraging and demonstrates that brokers and insurers can provide the products and solutions to enable the investment market to continue to grow. There are rapidly evolving challenges facing emerging markets, but the credit and political risks insurance market remains supportive of investors, corporates, financiers and traders across both these territories and more established markets. This is not the case in many other commercial insurance lines where capacity is a significant issue.

“Over time, market innovation has both opened up and supported access into emerging markets and broader underlying asset classes, and insurance is acting as a critical enabler of enterprise – its resilience and growth during this period of heightened risk continues to provide crucial support to the global economy.”