From Trump to Brexit, politics drive firms into insurers' arms

Mon Apr 24, 2017 1:36pm EDT
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By Brenna Hughes Neghaiwi and Carolyn Cohn

ZURICH/LONDON (Reuters) - Rocked by a shakeup in the Western political order, companies are buying more insurance to protect themselves against the threat of rising protectionism and upheaval to their operations in emerging markets.

Insurers say 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 United States and Britain's vote to quit the European Union last year to the presidential election process now underway in France.

Multinationals - ranging from oil and gas firms to mining groups, industrial manufacturers and banks - are concerned that unforeseen changes in government policies could lead to business disruption, flouted deals and unrest in their growth markets.

The kind of cover they want is not a large contributor to most insurers' business but is considered higher margin and is growing, market players say.

Zurich Insurance said 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 political risk was an important part of its specialty risk insurance business, which totals $2 billion in gross written premiums a year.

"As we see dramatic changes in U.S. foreign policy and European policy and the integrity of the European Union 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."   Continued...

A woman walks past official posters of candidates for the 2017 French presidential election Marine Le Pen, French National Front (FN) political party leader (L) and Emmanuel Macron, head of the political movement En Marche !, or Onwards !, (R) at a local market in Bethune, France, April 24, 2017.  REUTERS/Pascal Rossignol