Insurance Marketplace Realities 2024 – Political risk

Rate predictions: Political risk

	Trend	Range
Political risk		+10% to +70% for renewals depending on country mix within portfolio Flat for anniversaries within multi-year policies (same host country sub-limits), flat to +10% for increases in host country sub-limits

Overall, the PRI market remains hardened with the following emerging dynamics:

• Self-insured retentions (SIRs) are being used more regularly, particularly on transactions with many host countries.
• Several carriers are lowering their line-size per transaction; placements require more syndication.
• Appetite for large numbers of host countries has declined, several carriers preferring single-country transactions or a smaller set of countries, such as five; pricing on programs of a higher number of countries has increased.

The continuing spate of coup d’états in Africa highlight a potential for more instability on the continent.

• Gabon experienced a coup d’etat on August 30, 2023, shortly after the announcement that incumbent president Ali Bongo Ondimba had won the August 26 general election. The reasons cited include views that the country’s oil wealth had not trickled down and helped regular citizens, potential corruption and the political process.
• Niger experienced a coup d’etat on July 26, 2023; the country’s presidential guard removed and detained President Mohamed Bazoum citing dissatisfaction with the security situation of extremist groups and some protestors citing anti-French sentiment. Burkina Faso, Guinea, and Mali have declared support for the junta and will not apply sanctions and have asserted furthermore that any military intervention in Niger was a declaration of war against the two countries. France has said it will withdraw its ambassador and its troops over time.
• Earlier this year Sudan, and previously Mali, Guinea, Chad, Burkina Faso, have also had coups. Since 2020 there have been nine coups in West Africa, Central Africa and the Sahel region.
• The key takeaway is to contemplate how North American insureds will be treated in the wake of such a coup by both the juntas and by the population at large, and how the contagion might continue to other African countries that have a similar profile.

Latin America continues to show instability with unrest and government actions.

• Ecuador’s President Guillermo Lasso in May dissolved Ecuador’s legislature, plunging the country deeper into a security crisis with unrest and the dramatic assassination of presidential candidate Fernando Villavicencio in August. Run-offs of the snap election are scheduled for October 15 in a country that was once one of Latin Americas safest countries.
• Nicaragua's recent expropriation actions against educational institutions are a concerning development on investments.
• This region is one we continue to watch for increased risk of expropriation, political violence and currency inconvertibility.

High profile seizures in Russia showcase challenges of exit for multinational companies.

• In July, per CNN, Russia seized share-holding of two companies, a brewer and a yogurt maker, by a decree signed by Russian President Vladimir Putin in which these foreign-owned stakes were put under the “temporary management” of Russia’s federal property agency.
• Companies are also struggling to repatriate dividends from “unfriendly jurisdictions” per Financial Times, billions of dollars of western profits are trapped in Russia in the amount upwards of $18 billion.

China continues to be a country of investor interest for political risk insurance while capacity has declined for new business.

• Capacity remaining is likely (+/-) $15 million to 60 million depending on the transaction.
• Remaining capacity generally excludes companies in sectors deemed politically sensitive (e.g., technology and defense), and underwriters are doing much more due diligence.

In our recent Political Risk Index: Spring/Summer 2023, we examine how today’s cost-of-living crisis fuels political turmoil. In addition, as all our Political Risk Index editions do, we provide analysis on 61 countries with respect to their risk levels for expropriation, currency inconvertibility, political violence, terrorism, and sovereign default.

We encourage clients with exposures abroad to proactively consider political risk-transfer options for their country(ies) of interest before it becomes front page news to guarantee non-cancellable, multi-year cover.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for losses relating to the Ukraine crisis. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include coverage relating to the Ukraine crisis. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third-party sources we consider reliable; however, we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. The Ukraine crisis is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

Contact

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Laura Burns

Head of Political Risk, North America

email Email phone +1 646 684 9626

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