What’s happening to CPS in a heightened risk climate?

13 January 2017

Despite considerable macro-economic and political risk, conditions in the credit and political risk insurance market remain favourable for buyers. 

Risk is up across the board. Brexit in Europe, and the new Trump administration in the US, are yet to play out. Key elections are upcoming in France and Germany. Russia is resurgent under Putin, and unrest continues in the Middle East. As such, political and economic uncertainty looks likely to escalate into 2017. 

Understandably, political risk is high on many clients’ agendas, but their expertise, and that of underwriters, means that many of these risks should be manageable. And with companies looking for risk management solutions to political uncertainty, demand for insurance is increasing, due to an expanding client base, and growing awareness of the benefits in the cover. 

Despite heightened risk, credit and political risk insurance continues to prove an attractive line of business for insurers, and a source of profitable growth. Competition and surplus capital in the wider insurance market have led to a steady flow of investment into credit and political risk underwriting, which has historically provided high returns for insurers.

In addition, large losses for insurers have been conspicuous by their absence of late. However, some are hanging in the balance due to past oil-price volatility; and smaller attritional losses have been more common across geographies and sectors.

Going forward, the main challenge for underwriters will be to maintain pricing discipline in the face of growing competition for generic credit and political risk business. At the same time, niche areas of activity are emerging, as underwriters look to differentiate themselves from their peers, and exploit particular areas of comfort or expertise. 

Topical tip for buyers

Engage the credit and political risk insurance market for what it’s best at: giving you the confidence to develop new markets and relationships in order to achieve growth. Insurers’ expertise in this area means that the value-add from this market often goes well beyond the benefit defined in the insurance policy itself.

For further information, please contact Edward Nicholson, Senior Partner on +44 20 7528 4522 or email edward_nicholson@jltgroup.com

contact Edward Nicholson
Senior Partner, Credit, Political & Security Risks
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