Demand for political risk insurance has gone up by 33% due to considerable uncertainty around the geopolitical and macroeconomic environment, a new Howden report has revealed.
The ‘Opportunity in flux’ highlights how increased geopolitical rivalries, policy uncertainty and competition for critical minerals are reshaping the risk landscape as well as driving demand for protection.
Despite the rising demand and strong underwriting performance, the credit and political risk (CPRI) market has seen slower premium growth in certain areas compared to other insurance sectors.
For instance, premium growth in trade credit for the CPRI market is significantly lower than half that of property and casualty and a fifth of cyber since 2019.
According to Howden’s research, the CPRI and surety market has an aggregated premium base of $50 billion that surpasses the size of many other specialty insurance markets, including marine and energy.
This can be used to further diversify its risk pool to increasingly serve clients’ evolving needs and support economic growth.
The report suggests that now is a crucial time to attract new entrants and encourage existing CPRI carriers to expand into new asset classes and territories, especially amidst a softening broader insurance cycle.
This is also backed by the CPRI market’s consistently delivering healthy net combined ratios, with trade credit in the range of 70-80%, which sits at the top end of the broader CPRI market.
These are results that “rival the best underwriting in the market,” Howden noted, “and it is therefore equipped with the skills and expertise for sustainable expansion.”
Matthew Strong, Deputy CEO, Howden CAP and Head of Credit and Political Risk, commented: “The CPRI market’s outstanding long term performance is testament to the deep sector expertise that pervades the value-chain.
“With demand for CPRI protection rising, now is the time for the market to step up even further. This will enhance global economic growth by increasing commitments and innovating, as well as providing businesses, lenders and public sector entities around the globe with the certainty they need to trade and invest with confidence.”
Phil Bonner, Managing Director, Global Specialty Treaty, Howden Re added: “Opportunity is the key takeaway to emerge from our report. Yes, risk is up in a highly fractured world, but providing protection to help clients trade and invest through such uncertainty is precisely why CPRI exists.
“Our market does this in a way no other can whilst achieving exceptional performance, as demonstrated by underwriting results that rival any other product line of insurance. As demand for protection rises in response to global instability, our call to action for the market is to not only provide adequate supply but to also offer underwriting flexibility and imagination that keep up with clients’ changing needs.”
