Companies seek cover as political risks increase

Rocked by a shakeup in the Western political order, companies are buying more insurance against the threat of rising protectionism and upheaval to their operations in emerging markets, the Reuters reported on Tuesday.

Insurers said in recent days that demand is being driven by uncertainty over the consequences of a string of events in the developed world from Donald Trump’s election in the US and the UK’s vote to quit the EU last year to the presidential election in France.

Multinationals ranging from energy companies to mining groups, manufacturers and banks are concerned that unforeseen changes in government policies could lead to business disruptions, broken deals and unrest in their growth markets.

The kind of cover they seek is not a large contributor to most insurers’ business but is a highermargin, growing business, market observers said.

Zurich Insurance said that new business at its political risk and trade credit unit was up 14 percent in 2016, driven by demand for cover against the risk of a government or state- owned entity defaulting on its obligations. Growth continued with an 11 percent increase in the first quarter of 2017.

Zurich gave no overall figures but said that political risk was an important part of its specialty risk insurance business, which has $ 2 billion in gross written premiums a year.

“As we see dramatic changes in US foreign policy and European policy and the integrity of the EU itself, that affects the global environment,” Zurich’s head of credit and political risk David Anderson said. “It affects what emerging markets do, and it affects how countries perceive the rule of law.”

Since becoming president in January, Trump has ordered a missile strike on Syria, reversing his predecessor Barack Obama’s decision against attacking Damascus government targets, and pulled the US out of the Trans- Pacific Partnership trade deal with Asian countries.

In an example of policies already used, Zurich paid $ 31 million to a client that had to evacuate staff from Yemen under a claim made in 2015, which was when a Saudi- led coalition supported by the US began air strikes on the country.