Insurance industry on high alert

The insurance industry remains on high alert as numerous political and geopolitical risks remain ahead of the upcoming US election. According to Marsh’s proprietary country risk model, World Risk Review, the risk of civil unrest in North America and Europe alone has increased significantly compared to five years ago, by 17% and 10% respectively.

Angela Duca (pictured left), global head of credit specialties at Marsh, shared Insurance business the urgent need for sharp, proactive risk management.

“The leading political risk insurers have become more cautious in their underwriting approach over the last 12 to 18 months, particularly for high coverage amounts,” she explained. “And that’s due to factors like risk concentrations, increased tensions between China and Taiwan, ongoing conflicts in Ukraine and other countries, and increased claims activity. When I think about the upcoming elections in the US, there could still be instability in the relationship between the US and the world because the world is more fragmented now and could continue to be so.”

And this divided political environment, with opposing opinions on both sides, could inevitably spill over into the business world and have long-term implications for companies.

“This year, more than 60 countries around the world are holding national elections, the results of which will have implications for years to come,” Duca added. “We therefore expect this environment of heightened geopolitical risk to persist for some time.”

Christopher Coppock (pictured right), head of political risk analysis at Marsh, shared a similar view, stressing that trade and regulatory uncertainty remains.

“Trade-oriented, integration-oriented policymaking is no longer the norm globally, and this trend is likely to continue,” he said IB“Instead, ensuring the security of supply chains and access to critical resources has become paramount.”

Coppock also pointed to the potential impact of the US election results on global relations, particularly between China and the EU.

“If US tariffs on Chinese imports rise, Europe could be inundated with excess production from China, potentially creating a trade and regulatory test that is too complex for Brussels,” he added.

Current global conflicts such as those in Ukraine and Gaza pose significant risks to the insurance market. However, as Duca stressed, while these losses are rare, they can be serious.

“We have not received many claims from Gaza, likely due to the small size of the territory and limited foreign investment, while the conflict in Ukraine has resulted in losses and claims,” ​​she said. “However, it is important to note that not all companies have insurance on their Ukrainian assets, which could limit the number of claims actually submitted.”

Marsh is adapting to today’s environment of heightened and uncertain political risk by initiating processes earlier, maintaining close relationships with insurers and exploring alternative risk structures for its clients.

“We are looking at multi-tiered programs, different deductible features and alternative policy terms to navigate the volatile environment,” Duca added.

In addition, Duca advised his clients to conduct a thorough risk assessment and consider the maximum possible losses they could face.

“Calculating the magnitude of what is at stake is crucial,” she said IB“If we understand the risks, whether they are people risks, asset risks or financial risks, we can manage them better.”

As emerging political risks become a growing concern for businesses, employers are urged to understand the interconnectedness of global events and their potential impact.

“Reputational risks, particularly those associated with government actions, can have significant impact,” Coppock added. “Companies must be prepared for potential backlash from both government and non-government actors.”

For Coppock, an important example of reputational risk is possible government retaliation.

“After Europe imposed tariffs on China’s electric car subsidies, Beijing has hinted that it might target French alcohol or aircraft exports in retaliation,” he said. IB“This shows how companies can get caught in the crossfire of geopolitical conflicts.”

Again, Duca stressed the importance of proactive measures and forward thinking. “In today’s environment, clients need to be more vigilant and proactive, for example, conducting a gap analysis to identify where there are gaps and overlaps in their insurance programs.” She recommended having brokers or risk managers thoroughly review all coverages, paying particular attention to political risk, political violence and terrorism policies.