Marsh has warned of a risk of mass bankruptcies among “zombie companies” that have been kept afloat by government-back schemes during the COVID-19 pandemic.

Many countries established or amended state-backed trade credit schemes to provide economic stability during the pandemic, but critics argue that while they have supported domestic trade and exports, they have also kept alive companies with heavy debt burdens and low cash reserves.

The broker’s Political Risk Map 2021 points to the risk of bankruptcies among the companies once the government-backed schemes expire.

Marsh says overall pandemic-induced economic stress will continue to exacerbate global political risk throughout the year and amplify threats facing already fragile economies.

“As the world recovers from the effects of COVID-19, we expect the issues of social inequality, country economic risk and strategic resource nationalism to take centre stage in influencing political decision making,” Marsh Specialty Global Head of Political Risks Stephen Kay says.

“Insurance-backed political risk and credit solutions can help to secure trade and investment capital, unlock liquidity, and enable growth that will fuel and sustain the recovery from COVID-19.”

Pacific Head of Political Risk and Structured Credit Kyle Williams says managing for extreme volatility has become the norm rather than the exception.

“The economic, political, security and societal outlook on a global basis has seldom looked more complex or volatile,” he says. “Post-COVID, boards of Australian corporates, exporters and investors exploring global opportunities have a historic set of opportunities and downside risks to manage.”