Claims ’23 was a mixed bag. On the credit side, claim collections were counterintuitively at the lowest level since 2008 but political risks – specifically political violence – saw a WTW record-breaking year, largely attributable to losses in Ukraine, though the rest of the world had its fair share of issues too.
Taking each loss category in turn – political violence largely stemmed from the war events in Ukraine, though sub–Saharan Africa also saw a fair amount of activity from previous violent protests in South Africa, Ethiopia and Nigeria.
Challenges for clients and insurers alike, included how to account for losses when it was simply too dangerous to access the loss sites to assess quantum, with satellite imagery being increasingly used to try and provide insight, particularly where the violence is enduring as we’ve seen in Haiti, Ukraine and other countries. Interestingly, complex business interruption coverage in both the food and power/utilities sectors played a significant part in the sums lost rather than just pure physical damage.
Political risk losses were also up this year at $6.9m caused by ongoing issues in Afghanistan and most notably the war events in Ukraine – with clients forced to abandon operations due to the precarious security environment. Political risk notifications of potential loss are also up with clients facing issues repatriating funds from countries with currency issues, for example from Russia and Myanmar.
Non-payment losses were exclusively related to sovereign defaults (contract frustration “CF”), standing at $21.7m. In 2023 we collected the last few payments related to the 2020 Zambian default and saw the beginning of the flow from both the Sri Lankan and Ghanaian sovereign defaults. All payments were made in full and on time. Whilst there were notifications in the credit risk (“CR”) space, none of these materialised in to claim payments as our clients were able to find workout solutions.
It was a positive year for non-payment recoveries (mostly credit “CR”) with insurers recouping $6.8m by means of debt sales and funds flowing from companies that have been restructured. We have seen little in the way of progress in the sovereign (“CF”) recovery space this year as discussions with the IMF and other stakeholders continue in countries like Zambia and elsewhere.
Is this a lull before a political and credit risk storm? Political risks are elevated, violence levels are elevated and the number of countries carrying unsustainable debts is up. Time Magazine has already called 2024 the Year of the Election with approximately 49% of the world’s population scheduled to head to the polls. Change and uncertainty are the inevitable consequence – but will the claims follow?
What will the new year bring?
For more information please contact our Financial Solutions team.
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