Political risk losses surge in 2022, finds WTW survey

Commercial Risk Europe magazine reports that WTW’s annual political risk survey shows an: “unprecedented” 92% of companies reporting a political risk loss in 2022. That may come as no surprise to political risk underwriters and their corporate risk partners but what is maybe surprising is that the number is up from 35% in 2020. According to the report, WTW said that political risk has gone from being a “low-frequency, high-severity peril” to “everyone’s risk”.

Further analysis reveals that: “Some 86% of survey respondents from western European reported a negative financial impact from the war in Ukraine, while 33% of North American firms reported a hit to their bottom line. WTW said one US tech company incurred a loss of almost $1bn after ending operations in Russia and Belarus. Almost half of companies (48%) incurred a direct political loss from Brazil, Russia, India or China.”

The top countries most likely to trigger political risk losses are Russia India, China and Brazil, which are tied in first place on the list. Large global corporates are all embarking on transformation projects to improve political risk management. The report states that since February last year: “68% now buy political risk insurance, almost treble the 25% in 2019.”

Ukraine, unsurprisingly tends to dominate the political risk discussion. The next threat on the corporate risk radar is the potential for decoupling from China and the likely major impact that would have on global supplies chains for corporates as well the increasingly interconnected Business Interruption exposure. Consequently: “42% of respondents expect decoupling from China to strengthen in 2023, up from 12% in 2022. It found that half of survey respondents believe deglobalisation will greatly strengthen in 2023, up from just 16% in last year’s survey.

Much of these survey findings chime with recent Russell analysis which shows that de-globalisation has the potential to re-shape connected exposure outcomes. Connected Risk has indeed come of age as a concept, and will be defining the shape of much Russell thinking in 2023, starting with an underwriter/corporate risk management panel we will be hosting at the Lloyd’s Old Library on the 7th June.

Post Date: 21/04/2023

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