Insurance broker Willis Towers Watson has launched a US$1bn political risk insurance programme based on a new modelling and analytical tool ‘Vapor’ (Value at Political Risk).
Developed in partnership with Oxford Analytica, Vapor, which was launched in December, enables companies to assess and calculate in real dollar terms the financial impact of political risk exposure by industry and country, both as annualised expected loss and probable maximum loss.
Willis Towers Watson has now, together with global insurers, developed a new policy wording based on this new algorithm. It is targeted at large global clients who may have existing assets or are considering future investments overseas. The programme is supported with over US$1bn of market capacity, the broker says in a statement.
According to Andrew van den Born, managing director of financial solutions at Willis Towers Watson, the combination risk data analytics and the programme’s coverage capabilities will enable the company’s clients to “make more informed investment decisions and allow them to plan and grow their business with confidence in an increasingly unstable environment”.
“Geopolitical risk is an increasing concern to our clients who are seeking new ways to assess and mitigate these risks,” adds Alastair Swift, head of corporate risk and broking for the UK at Willis Towers Watson. “Additionally, there is increasing demand from corporate shareholders, investors and lenders for companies to articulate transparently their strategy to manage these exposures. To meet these requirements, a consistent and vigorous risk quantification methodology and thorough evaluation of available risk transfer opportunities will be needed. This programme is specifically directed towards meeting these demands.”
Vapor is designed to anticipate where unexpected market exposure will emerge, and where headline risk may conceal opportunities for well-prepared organisations. The methodology provides global corporations and investors with a relative measure of political risk across 160-plus countries, 14 industry sectors and six political risks, from war and political violence to expropriation, sovereign default, trade embargoes and capital controls.