Capacity at record highs for credit and political risks

With 2022 and 2023 marked by increasing geopolitical risks, the credit and political risk insurance market (CPRI) has access to more capacity than ever before, according to WTW.

The broker noted that notional maximum capacity increasing across the board, according to the Credit and Political Risk Insurance Capacity Survey and Market Update.

The findings are based on a survey of fifty-eight insurers across Lloyd’s and company markets taken this January. Of these, 49 expanded on their appetites and capabilities as at 31 January 2023. The survey also benefits from WTW’s own databases alongside commentary based on its interactions with insurers throughout 2022.

  • The survey found that there has been a substantial increase in total notional CPRI capacity as at 31 January 2023 with:
  • Approximately $4 billion contract frustration total notional capacity available per transaction, up from USD 3.4 billion this time last year (20% increase)
  • A 17% increase in transactional trade credit (to $3 billion)
  • A 37% increase for non-trade credit (to $2.2 billion)
  • Overall political risk capacity up by nearly 15% to almost $4 billion
  • Increase in capacity across all tenors generally, with particular growth in contract frustration where notional capacity for 15-year tenors is $2.5 billion versus $1.8 billion for the previous year (37% increase)

When asked about exposures, 32 CPRI insurers detailed their top three countries by exposure, with the US, the UK. and Nigeria ranking first, second and third respectively.  All 49 respondents listed their top industry exposures, which were – in descending order – financial institutions, sovereign, oil and gas.

“The fact that we are seeing a continued and steady increase in capacity within the CPRI market denotes its stability as well as the market’s confidence in this sector” said Emma Coffin, head of Broking, Global Financial Solutions at WTW. 

“Each of the three main CPRI perils, contract frustration, transactional credit and political risk, have experienced growth over the past two decades through various market cycles, across the COVID-19 pandemic and the resulting lockdowns.

“Oil and gas has declined from first place to third place in respect of top industry exposures and this survey also highlights a marked rise in renewables and ESG with a positive shift in the number of markets able to support clients with challenging financing structures.  We foresee all these positive trends continuing in 2023.”