Intensifying geopolitical rivalries, policy uncertainty and competition for critical minerals are reshaping the risk landscape as well as driving demand for protection, according to a new report by Howden.
In its latest credit and political risk insurance (CPRI) report, Howden found that new demand for political risk insurance is up by a third due to considerable uncertainty around the geopolitical and macroeconomic environment. Amid the softening of the broader insurance cycle, Howden’s report argues that now is the time to draw in additional new entrants and for existing CPRI carriers to accelerate ventures into new asset classes and territories.
Despite rising demand and strong underwriting performance, growth lags in certain areas of the credit and political risk market, with premium growth in trade credit running at less than half that of property and casualty and a fifth of cyber since 2019.
Further, the research highlighted the opportunity for the $50bn surety and credit and political risk market to further diversify its risk pool to increasingly serve clients’ evolving needs and support economic growth.
Market opportunity
The CPRI and surety market surpasses the size of many other specialty insurance markets, including marine and energy.
The series of economic and geopolitical shocks in recent years has done little to hold back the CPRI market’s performance: it consistently delivers healthy net combined ratios, with trade credit in the range of 70-80%, which sits at the top end of the broader CPRI market. These results rival the best underwriting in the market, and it is therefore equipped with the skills and expertise for sustainable expansion.
While the market has performed strongly, premium growth has not developed at the pace of other business lines, including property and cyber. There is room for a greater growth rate in today’s world; CPRI presents a compelling case from both a buyer and capacity provider perspective in supporting businesses to invest and trade through heightened volatility whilst delivering market-leading underwriting results.
Driving economic growth
The report also identified some of the less penetrated asset classes ready for expansion that offer a strong underwriting opportunity for the market to drive economic growth. This will provide buyers with the certainty they need to expand into new territories and grow their portfolios in a new world order.