Demand for political risk insurance has surged by one-third amid trade disruption and geopolitical and macroeconomic uncertainty, Howden says.

Despite this, premium growth has not matched other business lines, including property and cyber, indicating “room for a greater growth rate”.  

The $US50 billion ($76.93 billion) surety and credit and political risk market – larger than marine and energy – could diversify its risk pool to meet clients’ evolving needs, Howden says in a report.  

It urges new underwriters to offer the product and says existing carriers should expand into new asset classes and territories. Underwriting results “rival the best in the market”, with “consistently healthy” net combined operating ratios of 70%-80% for trade credit.  

Howden Re MD of global specialty treaty Phil Bonner says opportunity “is the key takeaway”.

“As demand for protection rises in response to global instability, our call to action for the market is to not only provide adequate supply but to also offer underwriting flexibility and imagination that keep up with clients’ changing needs,” he said.

“Much of the capacity is holding growth, opportunity and ultimately purchasing back. This capacity, if it wants to remain with the best-performing, most capable underwriting teams, needs to be more imaginative.”

Non-payment insurance is the fastest-growing segment of the market. Other growth areas are acquisition finance, derivatives, commercial real estate, net asset value finance, and leveraged buyout term loans.

The report says: “The opportunity to grow the [non-payment insurance] market by applying it at the portfolio level, rather than to single risks, is clear and immediate. Others, such as replicating forward-looking covers across more asset classes (e.g. leveraged finance), will emerge over time.”

Rising awareness of the insurance will help demand spread beyond “what remains a European-centric market, particularly in the large, short-term export credit segment”.

See the report here.