Capacity remains close to an all-time high in the credit and political risk commercial insurance market despite rising geopolitical tensions, according to Gallagher, the insurance broking, risk management and consulting firm.
Matthew Solley, managing director of structured credit and political risks at Gallagher, cited US-China trade tensions, territorial disputes in Southeast Asia, rising tensions in the Gulf and depreciating emerging market currencies among the risk factors weighing on the insurance market.
But while the risk appetite of some insurers is still tempered by losses connected to the commodity downturn, the market remains open to underwriting opportunity, noted Gallagher.
According to Gallagher there is just over $3 billion of capacity for political risk in the market, and $3.1 billion of capacity for trade and secured non-trade government counterparty risk. Capacity for trade and secured nn-trade private counterparty risk is just under $2.5 billion, while capacity for unsecured non-trade is $1.7 billion.
Traditional insurance buyers, and particularly banks, are acquiring more insurance, which is supporting the market, it said. In addition, private market and the public sector institutions such as export credit agencies and multilateral institutions are increasingly cooperating, with commercial insurers taking an optimistic view of the impact public sector institutions can have.
Credit risk is defined as where a counterparty is a commercial entity with a majority private ownership, while political risk is where losses are caused by government actions or political perils.
“The increasing depth of expertise within the market is enabling insurers to continue to take on risks in challenging territories, providing cover which is of critical importance in enabling emerging market growth, whilst policyholders have the benefit of protection from well rated insurers,” said Solley. “Effective risk mitigation for trading, financing and investment activity globally leads to a more stable environment for investors, corporates, financiers and traders in uncertain times."
Gallagher, Matthew Solley