Credit, political & security insurance market update

25 January 2019

Notwithstanding an increasingly uncertain and volatile political risk environment, credit, political, surety and security risk underwriters are keen to support clients as they seize opportunities for growth.

Trade disputes, a growth in nationalism and significant increases in debt in emerging markets all mean that the political, economic and security risk outlook will remain uncertain in 2019.

Geo-politics is also more complex today than it has been in modern history, with heightened tensions between the US, China and Russia, continued conflict in the Middle East, and challenges to historic economic order.

Despite this uncertainty, the credit, political and security market is relatively stable and continues to grow.

Capacity remains strong for structured credit insurance, with new markets entering and very few withdrawing. 

Underwriting sophistication among existing insurers is growing, and capacity and appetite to write more complex, longer-term and non-trade business is evolving.

The impact of the most recent update to bank regulation, commonly known as Basel 4, is still being analysed and may demand both further product development and more proactive engagement with regulators and industry bodies.

The short-term trade credit market continues to be soft, although there is some sense of general caution on the horizon reflecting the possibility that tightening of monetary policy and rising interest rates could result in an increase in corporate insolvencies.

The political risk market remains relatively soft, albeit selective; this is a market that has great potential for growth, but also needs to grapple with product evolution in some areas to enhance value.

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Softening of terrorism and political violence insurance rates moderated somewhat in 2018 and the same is true of the ‘special risks’ or K&R market.

Collectively these areas of ‘security’ risk are somewhat polarised between highly standardised products for many buyers and highly specialised advisory services for larger or more complex businesses.

This has led to exciting product development-driven new opportunities in addressing security threats broadly and collectively from physical risks, to human threats, crime and business extortion (including cyber) risk.

The commercial surety market is particularly favourable and growing today, with underwriters keen to offer solutions for a range of performance issues, particularly in the areas of collateral and letter of credit (LC) replacement.

The greatest opportunities for growth often emerge in uncertain risk environments. The credit, political, surety and security insurance market today has great appetite to help our clients secure opportunity in the current state of uncertainty.

This article is compiled for the benefit of clients and prospective clients of companies of the JLT group of companies (“JLT”). It is not legal advice and is intended only to highlight general issues relating to its subject matter; it does not necessarily deal with every aspect of the topic. Views and opinions expressed in this document are those of JLT unless specifically stated otherwise. Whilst every effort has been made to ensure the accuracy of the content of this document, no JLT entity accepts any responsibility for any error, or omission or deficiency. If you intend to take any action or make any decision on the basis of the content of this document, you should first seek specific professional advice. The information contained within this document may not be reproduced and nothing herein shall be construed as conferring to you by implication or otherwise any licence or right to use any JLT intellectual property.