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Survey Report

Insurance Marketplace Realities 2020 Spring update – Political risk

Credit, Political Risk and Terrorism
COVID 19 Coronavirus

May 7, 2020

Evaluate your enterprise’s preparedness for geopolitical upheavals and unanticipated black swan events.
Rate predictions
  Trend Range
Political risk Neutral Increase (flat yellow line to pink triangle pointing upward) Flat to +10%

Key takeaway

Evaluate your enterprise’s preparedness for geopolitical upheavals and unanticipated black swan events with a cross-functional lens involving risk management, legal, government affairs, HR — the broadest set of internal stakeholders.

Political risks are elevated for multinational businesses in the wake of the COVID-19 pandemic.

  • COVID-19 is likely to lead to significant economic distress in many countries, which may result in exchange transfer losses, particularly in small, fragile economies with large foreign debt burdens. If oil prices remain low, resource-exporting economies in sub-Saharan Africa will be among the hardest hit, along with Iran.
  • Larger emerging economies that may face significant COVID-19-related challenges include those for which tourism is a significant source of foreign currency earnings, such as Egypt, Morocco and Thailand. In addition, countries that rely heavily on exports to or investments from Europe and China will be affected, as growth in Europe and China slows. Russia, Turkey and Kazakhstan are significantly exposed. Austerity measures may in some cases trigger social unrest, as was the case recently in Chile and Ecuador.

Geopolitical fault lines are prominent in places we would expect and in some we wouldn’t.

  • Middle East: Military exchange between the U.S. and Iran may have ripple effects in the Middle East, further complicated by plunging oil prices and the global pandemic.
  • Political violence is on the rise: Over the past year, intense protests have resulted in unexpected business losses in Hong Kong and Chile, previously considered to be low-risk jurisdictions. In the first quarter of 2020, disruptive and sometimes violent large-scale protests took place in Algeria, India and Colombia. We expect that civil unrest risk will diminish in the near term as a result of COVID-19. However, once the pandemic eases, citizens of many countries will likely have new grievances to press against their governments.
  • U.S.-China decoupling: The U.S.-China technology decoupling continues; China ordered its ministries to remove foreign software and hardware from government offices within three years. This may have political risk implications at some point.
  • Oil price collapse: Falling oil prices, caused by the global economic slowdown and a production quota dispute, will likely threaten economic and political stability in oil-producing countries such as Sudan and Mozambique (with challenging debt burdens), Angola, Algeria and Iraq (with extreme oil dependence), and Oman and Bahrain (with a mixture of both).

Losses are rising.

  • Our 2019 Political Risk survey demonstrated yet again that political risks are impacting global firms. Over two-thirds of firms suffered a political risk loss in 2019.
  • Currency inconvertibility and non-transfer continue to be popular political risk coverages — particularly in commodity-dependent countries but also in countries that will continue to face economic consequences from a slowdown in the global economy.

Despite rising geopolitical tension, the influx of capacity to the political risk insurance (PRI) market has kept rates fairly stable. But increased risk may bring about a reduction in capacity and appetite over the coming year.

  • Rates are generally flat except in high-risk countries, where rates are rising and/or capacity is decreasing.
  • Property carriers may begin to exclude perils such as strikes, riots and civil commotion as a result of some large losses in the last year creating a gap in coverage. These risks can be addressed in the PRI market.
  • As a result of COVID-19 disruptions in the economy, we may see restricted appetite for vulnerable sectors, such as aviation, tourism, and commodities, including oil and gas. In the short-term, underwriters may restrict capacity for countries where the economy is not well diversified and economic slowdown from the pandemic may persist.
  • To put the market in context, overall 2020 capacity grew from last year, with over $3.2B notional capacity available per transaction for contract frustration (non-performance by government obligors) and $3.1B for political risks.
  • We advise global companies to take a proactive approach to their global portfolio and seek political risk coverage with urgency.


Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage. 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 and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. COVID-19 is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

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