Credit and political risk capacity climbs in H1
Increases seen across most categories, with growth in capacity for political risks (rising to $3.55bn), contract frustration ($3.44bn) and non-trade covers ($2.15bn)
Capacity in the Lloyd’s and company markets climbed to $11.84bn in July 2022 from $11.75bn in January 2022, according to Gallagher
London market capacity in structured credit and political risk lines edged up in the first six months of the year despite the gloomy risk environment.
Capacity in the Lloyd’s and company markets climbed to $11.84bn in July 2022 from $11.75bn in January 2022, according to broker Gallagher.
Increases were seen across most categories of insurance in the sector, with growth in capacity for political risks (rising to $3.55bn), contract frustration ($3.44bn) and non-trade covers ($2.15bn).
London market capacity for credit risk coverage remained stable at $2.7bn.
The increased capacity came despite the “increasingly uncertain risk environment” amid the war in Ukraine, which has “undoubtedly shifted” risk appetite, Gallagher said.
“Global energy prices, for example, are certainly affecting appetite for risks in the sector in both importing and exporting economies and across EMs [emerging markets] and DMs [developed markets],” Gallagher said.
Meanwhile, global growth estimates continue to be revised lower by economists. Fitch Solutions’ January 2022 forecast of 4.1% growth was adjusted to 3% in June 2022, with further downward revisions possible amid tightening monetary policy and increased uncertainty.
These headwinds have led to the withdrawal of some capacity from the market.
After pausing underwriting in April 2022, WRB Underwriting permanently exited the credit and political risk classes of insurance.
And in July 2022 Hiscox made the strategic decision to place its political risk book into run-off to concentrate on its core political violence portfolio.
But there have been new entrants, including Pine Walk Capital. The London-based specialist managing general agent platform launched Pernix Specialty, which specialises in political risk and non-payment risks.
“Encouragingly, overall the SCPR [structured credit and political risk] insurance market remains robust and committed to supporting clients in the face of global uncertainty in 2022 and beyond,” Gallagher said.
