The trade credit and political risk market across Asia Pacific is “growing rapidly,” thanks to global instability and local pressures.
Macroeconomic concerns and questions over political stability continue to rise globally, not just across the Asia Pacific market, and these concerns will see opportunities arise in the insurance market.
Mark Houghton, regional head of Political Risk and Trade Credit, Asia Pacific at XL Catlin, told
Insurance Business that as awareness of products increases, so does the need for innovation in the market.
“Awareness of trade credit and political risk insurance continues to grow in the light of the current social and economic instability, as well as political unrest,” Houghton said.
“Buyers of these products are getting more sophisticated, thus there is a growing demand for innovation in product coverage and capabilities.”
The continued focus of the ASEAN region on developing infrastructure alongside the One Belt, One Road strategy is creating opportunities for businesses in the market, but commodities remain a key focus of the sector.
Geopolitical risks are top of mind for more businesses across the region than ever before. The World Economic Forum found these risks to be the foremost concern for the first time in a decade.
The instability brought on post-Brexit and the upcoming elections in the United States, highlights the vulnerability of businesses, which is a key touch point when dealing with trade credit and political risk cover.
“The continuing demand for essential trade and infrastructure development across the region is driving more in depth conversations around risk management, both from a credit and political risk standpoint,” Houghton continued.
“Instability, whether that be the result of globally relevant political events such as Brexit or the US elections, as well as demagogue leadership and the rise of trade protectionism, have created a heightened awareness about the vulnerability of operating in a much more intimate global landscape.”
As a “largely unpredictable” market, thanks to the role of human behavior within the sector, Houghton noted that for businesses the best form of cover is often sound risk management techniques.
“Whilst heightened political tension and challenging economic conditions raise the profile of these products, we recommend customers put in place appropriate risk management programs to cover these risks through the full political/economic cycle, as opposed to when a specific country’s political environment makes a turn for the worse,” Houghton said.
“Cover at that point would be either unavailable or uneconomical. It is always better to purchase coverage before a risk occurs!”
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