Specialist insurance provider and underwriter Neon is set to spearhead a newly established London political risks insurance consortium alongside fellow insurer MS Amlin.
The initiative aims to tackle growing political uncertainty across the globe that has triggered increased demand for political risks insurance coverage.
The consortium will provide global insurance coverage to corporate investors and financial institutions and is mandated to offer up to US$100mn per policy with a seven-year limit.
According to Neon, the consortium is unique in that it is made up of 100% Lloyd’s capacity.
The consortium aims to offer cover relating to confiscation, expropriation, nationalisation, deprivation and political violence and war.
Nicholas Robinson, Neon’s newly-appointed head of specialty and leader of the consortium, says: “The consortium can support the growing group of financial institutions looking to lend into emerging markets and which therefore require country risk coverage.
“The consortium will provide the necessary scale and breadth of coverage for both London-based and global clients at a time where there is growing demand for the product, following various loss events in South America, Eastern Europe, North Africa and Asia.”
The trend of increased need for trade insurance against political risk was also highlighted in a recent members’ survey conducted by Berne Union and the International Credit Insurance and Surety Association (ICISA).
Three-quarters of respondents to the annual survey published last week believe political risk has become more prevalent over the past year.
Vinco David, secretary general of the Berne Union, says: “Political risk is clearly back. This is not only due to the impact of armed conflict – such as in the Mena region, Ukraine and Venezuela, but also due to more recent trade conflicts, which put the careful balance of multilateralism at risk.
“With considerably higher custom tariffs, such as in the US or China, some exporters are faced with difficulties if they cannot relocate to other markets or adjust their global supply chains.”
The survey also showed a rise in the frequency and severity of claims in several regions and sectors around the globe.
Rob Nijhout, executive director at ICISA tells GTR that respondents reported a rise in the number of claims from Asia and Mena and do not expect to see this change in the short term.
Mena and Asia saw the highest portion of claims relating to insolvencies of companies driven by macro-economic and political concerns, although this trend also affected other regions to a lesser extent.
Nijhout notes that “insolvencies can lead to further insolvencies of suppliers or other core trading partners of failed firms”.
“Overall, a rise in the number of claims has been seen in other regions as well and in several sectors, including construction and retail,” he adds.