Growth in protectionism & geopolitical tensions to impact re/insurers: Marsh

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Rising geopolitical tensions and protectionist sentiments, in combination with ongoing trade disputes, and resulting in increased uncertainty and risk for multinationals such as re/insurers, according to Marsh, particularly for those with direct foreign investments.

Marsh’s Political Risk Map 2019 rated more than 200 countries and territories on the basis of short and long term political, economic, and operational stability to provide insight into where risks are most likely to emerge and where multinationals should deploy financial resources.

Using data from Fitch Solutions, Marsh observed a transition to a more multi-polar world order of protectionism that is likely to continue through 2019, with isolationist practices rising in some countries and temporarily slowing the progress of globalisation.

The broker also raised concerns that trade tariffs and geopolitical disputes between the U.S and China could escalate in 2019, bringing the risk of further retaliation and potentially impacting export-heavy economies like Germany.

Across Europe, relations with Russia remain tense and could result in further sanctions, while the UK’s negotiations to exit the EU continue to pose political risk. Countries such as Spain are also experiencing sharp increases in political instability.

In contrast, positive results from 2018 presidential and legislative elections in Guatemala, Chile, and Paraguay led to improved political stability in those countries, Marsh said, although continued political unrest in Nicaragua significantly reduced the country’s stability.

The African region saw some of the biggest improvements in political risk and also some of the most notable deteriorations.

Marsh reported that stability in South Africa, Mozambique, and South Sudan all improved, while uncertainty around elections and deteriorating economic and humanitarian conditions have led to sharp increases in political risk in Zambia, Mali, Algeria, Tunisia, Cameroon, and the Central African Republic.

“Businesses with direct foreign investments are facing an unprecedented breadth of challenges today from emerging economies to so-called developed economies,” said Evan Freely, Global Practice Leader, Credit Specialties, Marsh.

“In uncertain times, vigilance and broad, systemic risk analysis coupled with political and trade credit insurance, will be vital to minimizing these threats,” he added.

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