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Survey Report

Insurance Marketplace Realities 2021 – Political risk

Credit, Political Risk and Terrorism

November 18, 2020

Traditional political flashpoints compounded by COVID-19-induced financial distress has led to elevated risks.

Rate predictions

Rate predictions: Political risk
  Trend Range
Political risk Increase (Purple triangle pointing up) Flat to +20%

Key takeaway

COVID-19 has created a superstorm for U.S. multinationals. Traditional political flashpoints compounded by COVID-19-induced financial distress has led to political violence, export bans, confiscations, selective discrimination and restrictions on movement of capital.

COVID-19 is creating elevated political risks.

  • The emerging markets debt crisis we predicted in our last report is now materializing, with four countries (Ecuador, Venezuela, Argentina and Lebanon) having defaulted on or restructured their debts so far this year, six countries on the verge of default (mostly in sub-Saharan Africa) and 25 countries at significant risk.
  • Large emerging markets, particularly Turkey, have come under economic pressure, joining a list of economies vulnerable to capital flight that includes South Africa and Mexico.
  • 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.
  • Debt-service relief and fiscal support from multilateral organizations and G20 donors will offer some breathing room, but this may not be sufficient to prevent a liquidity crisis from morphing into a debt crisis. Should such a crisis compromise access to financial markets, the current economic decline could prove much longer and deeper than expected. Read our Summer Political Risk Index.

Political violence is in on the rise.

  • Although the global frequency of protests has diminished somewhat due to lockdowns and the risk of infection, mass protests continue to play a major role in shaping global political risks.
  • Unrest in Belarus has triggered concerns about possible Russian intervention.
  • Major protest movements in Russia and Thailand and in industrialized countries, including the U.S., have arisen, in some cases despite government suppression efforts. Political protests could begin to break out in Brazil, Ethiopia, Iran and Myanmar.

U.S.-China decoupling is increasing political risk exposures for technology sector.

  • Perhaps the most dramatic shift in political risks associated with the pandemic has been the deterioration of relations between China and the West. The technology sector has become a battleground of government intervention, which could adversely impact numerous multinationals should retaliatory rhetoric escalate.

Political risk analytics help companies manage their political risk exposures and structure programs in an efficient and cost-effective manner.

  • Analytic tools provide decision-making support regarding deductibles, limits, perils to cover and countries to cover. They also help insurance buyers address the following risk areas:
    • COVID-19 shock: debt and currency crises in emerging markets
    • U.S. - China trade war and escalating retaliatory measures
    • Middle East: conflict between the U.S. and Iran possibly disrupting shipping in the region
    • E.U. de-integration: Eastern and Western Europe tensions and the Eurozone debt crisis potentially resuming
  • Our fourth annual political risk survey, containing an update on the scenarios of top concern, will be published in Q4 2020, along with two sector-specific survey reports: “Managing the New Political Risks in the Technology Sector,” and “Political Risks in Natural Resources.” See our 2019 Political Risk Survey Report.

New marketplace entrants have generally helped flatten upward pressure on pricing, but we are noticing a shift in appetite.

  • The political risk market is hardening a bit for new multi-country programs and single-country programs in countries with recent geopolitical headlines.
  • Property carriers have begun to exclude perils such as strikes, riots and civil commotion as a result of some large losses in the last year, creating gaps in coverage. These risks can be addressed in the political risk insurance market.
  • Capacity for China, Brazil, Argentina and Chile appears to be tightening.
  • Carriers are being highly selective across the board while appetite is reassessed, meaning more scrutiny of new inquiries.
  • Overall, 2020 capacity grew to over $3.2 billion notional capacity per transaction for contract frustration (non-performance by government obligors) and $3.3 billion for political risks.
  • We advise global companies to take a proactive approach to their global portfolio and seek political risk coverage with urgency, as market capacity is shrinking in some cases and rates are trending upwards.


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 subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.


Senior Vice President, US Political Risk Product Leader
Political and Credit Risk

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