Recent and startling changes in foreign policies all across the globe are driving demand for insurance, as companies purchase coverage against risks such as protectionism and turmoil in emerging markets.
Insurers claim that demand is being driven by insecurity over the overarching consequences of recent world events – Donald Trump’s election as President of the US, the Brexit vote, and France’s current presidential election, to name a few.
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It is these controversial world events that have multinational companies worried that abrupt changes in government policies could lead to business disruption, canceled deals, and unrest in potential growth markets.
Although the type of coverage these companies want is typically not a significant contributor to most insurers’ business, industry experts explained, it is considered higher margin and has a lot of room to grow.
Zurich Insurance told
The Globe and Mail that new business at its political risk and trade credit unit climbed 14% in 2016, “driven by demand for cover against the risk of a government or state-owned entity defaulting on its obligations.” The insurer also said that growth continued in the first quarter of 2017 in the form of an 11% increase.
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Although Zurich did not reveal any overall figures, the company said that political risk made up an important part of its specialty risk-insurance business.
“As we see dramatic changes in US foreign policy and European policy and the integrity of the European Union itself, that affects the global environment,” said Zurich Credit & Political Risk head David Anderson. “It affects what emerging markets do, and it affects how countries perceive the rule of law.”
Lloyd’s of London also reported increasing demand for political risk and violence insurance.
“Brexit made people understand sometimes the unthinkable happens,” said
Marsh political risk and trade credit head Evan Freely.
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