Insurance Marketplace Realities 2025 – Political risk

Rate predictions: Political risk

Trend	Range
	Flat to +20% (Flat for anniversaries of multi-year policies if no change in sub-limits; increases between +5% to +20% for renewals other than China; for China-driven programs, upwards to +30%.)

Overall, the political risk insurance market remains a hard market with the following emerging dynamics:

• Rates are beginning to stabilize with flat to 20% increases at renewals. China is an exception, however, with many carriers wanting more rate — upwards to 50% and sector-dependent.
• China capacity has increased slightly in the last six months with a few carriers willing to offer one-year capacity on some “benign” industry risks.
• Self-insured retentions (SIRs) continue to be used more regularly, particularly on transactions with many host countries.
• Appetite for large numbers of host countries has continued to decline, several carriers preferring single-country transactions or a smaller set of countries (e.g., five); pricing on programs of a higher number of countries has increased.
• Capacity remains constrained in Argentina, China and, increasingly, West Africa (Burkina Faso, Nigeria, Niger, Mali).
• Trade disruption inquiries have increased, and rates have increased 5% to 10% following recent activity, such as the Baltimore bridge collapse and the Houthi attacks in the Red Sea, driving detoured transportation routes.
• Appetite remains strong for single-situation project risks.

2024 year of elections noteworthy outcomes

• Mexico’s election on June 2, 2024, ushered in victory for Claudia Sheinbaum, its first woman president, whose MORENA party received about 60% of the vote. Many analysts suggest her administration will deliver a continuation of ALMO’s policies under which we saw deterioration of the investment climate with a few high-profile expropriations and nationalization of the lithium sector. The erosion of macroeconomic fundamentals too could jeopardize the extent of the nearshoring Mexico may see, along with its relationship with the newly elected U.S. president.
• Underwriters are more cautious on Mexico risks recently, with capacity constraints by some carriers. Also important in this sector is the underwriting of energy, mining or any pet projects viewed as high risks.
• Venezuela’s election results remain contentious following the July 28, 2024 election in which incumbent President Nicolas Maduro stated he had won the election despite the opposition party citing data that they had won by a “wide margin.” Protests continue, and the opposition party leader Edmundo Gonzalez Urrutia has fled to Spain. Underwriters have long been off cover in Venezuela. They continue to watch whether Maduro may look to annex or create “noise” around Guyana, considering the extensive oil reserves.
• Burkina Faso’s lack of an election in July highlights the challenge to democracy in the region. The military junta, which took power in a coup d’etat in 2022, was meant to hold elections in July of this year to restore civilian rule. However, they have cited that they are “not the priority” given the security situation with terrorism from al Qaeda and the Islamic State. Their joining Mali and Niger in a new Sabel alliance and withdrawal from ECOWAS has also created concern in the investment community. Underwriters have been increasingly reluctant to write new business in the region.

Other hotspots and trends

• The conflicts in Israel and Ukraine dominated Western attention. Both conflicts continued to escalate, with Ukraine launching a counteroffensive into Russia, and Israel and Iran conducting direct exchanges of missile and drone attacks, threatening a broader regional conflagration. Despite a coalition effort against the Houthis that reduced the frequency of attacks on shipping, severe attacks continued, with multiple ships disabled or sunk. Underwriters are generally off cover for Israel and Ukraine. Some underwriters will write confiscation-only coverage in Israel. The U.S. Development Finance Corporation (DFC), MIGA and other ECAs are generally open to new Ukraine risks.
• WTW published its annual political risk survey. This year, the financial impact of political risk was substantially less than 2023, when corporate losses stemming from the escalation of conflict in Ukraine exceeded $100 billion. That said, political risk loss events continued to be strikingly frequent, compared to earlier years of the survey. In 2024, nearly 70% of respondents reported losses stemming from geopolitical disruption of supply chains — primarily due to strikes on shipping by Houthi rebels in Yemen.
• Contestation for the geopolitical loyalties of emerging market countries continued, as covered in a prior edition of the WTW political risk index. Changes in geopolitical alignment have caused large losses for investors in Mali and Myanmar. This quarter, it was the turn of Niger, where large mining investors found their assets in peril as the country increasingly relied on Russian mercenaries.
• Large-scale protests continued in emerging economies in financial distress. The government of Bangladesh was deposed following uncontrollable mass protests; Nigeria and Kenya faced substantial mass unrest after governments announced plans to withdraw popular subsidies, or increase taxes, on food or fuel. Many emerging markets are struggling with a debt hangover because of measures taken to keep their economies afloat during the pandemic. As governments adopt austerity measures to pay down that debt, they risk triggering political violence. This emerging issue was also covered in the WTW political risk index. Underwriters remain cautious in these countries.

We encourage clients with exposures abroad to proactively consider political risk-transfer options for their country

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).