Capacity for credit and political risk insurance close to all-time high, says broker Gallagher

Capacity is close to a record high in the credit and political risk commercial insurance market, which remains open to underwriting opportunity.

That’s the view of Gallagher, one of the world’s biggest insurance brokers. It said activity between January and July of this year had been aided by a number of factors, including traditional insurance buyers, notably banks, acquiring more insurance, as the product becomes embedded in their own businesses. Gallagher also pointed to further cooperation between the private market and the public sector, such as export credit agencies and multilateral institutions, as having helped.

However, the risk appetite of some insurers is still tempered by losses connected to the commodity downturn, said Gallagher.

Matthew Solley, Gallagher’s managing director, structured credit and political risks, said the range of risk factors and potential issues for insureds and insurers alike was showing no signs of slowing in 2019. He pointed to US-China trade tensions, territorial disputes in South East Asia, rising tensions in the Gulf and depreciating emerging market currencies putting a strain on foreign debt repayments.

However, he added that the increasing depth of expertise within the market was enabling insurers to continue to take on risks in challenging territories, and provide cover of critical importance in enabling emerging market growth.

Gallagher said unfunded credit protection remains a subject of scrutiny for UK and European regulators. For example, the Prudential Regulatory Authority's policy statement, issued in March, addressed the eligibility of guarantees as unfunded credit protection. This action was welcomed by the market for its pragmatic approach, said Gallagher.

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