Political risk underwriters are watching intently as events in Egypt unfold; all too aware that if the violence continues, there is potential for a stream of losses to hit the market.

Some insurers are beginning to review their exposures on Egyptian risk, but as yet no one is prepared to make any clear predictions.

“From a political risk point of view it is too early to say whether the events in Egypt will lead to losses in the insurance market,” comments Beverley Marsden, director of Aon Political risks in an official statement released this week.

“Global confiscation policies may include political violence cover and rioting and looting may impact assets covered under such policies. We cannot advise at this stage on the extent to which this has happened.”

The Egyptian president Mubarak states that he will not run for re-election when his current presidential term ends in September.

This news has not subdued the riots, and protesters continue to demand that Mubarak steps down immediately.

Clashes between anti-government protestors and pro-Mubarak supporters broke out in Cairo’s Tahrir Square this week when thousands of Mubarak supporters poured onto the square, culminating in some of the worst violence witnessed since the rioting began.

The deteriorating situation is already being felt in the financial markets, with Egypt’s five-year credit default swaps (CDS) hitting highs of 450 basis points this week.

The OECD has issued a statement estimating that the continued blocking of Egypt’s internet services is likely to have cost the country US$90mn so far.

It warns that the long-term impact could be even greater, as it has cut off domestic and international high-tech firms who provide services globally. It will also make it more difficult to attract foreign companies into the country.

However, Aon’s Marsden believes the shutting down of the internet will not be a major factor contributing to any increase in insurance claims.

“Shutting down the internet or mobile networks would not necessarily generate claims as such action is likely to be short term – plus government contracts with mobile telecoms providers may well give the government the right to shut down networks for reasons of national security,” she explains.

“We are all watching of course what happens to the Egyptian government. Whatever political system emerges will likely have medium-term implications on political risk. Right now the market can only look at their exposures and monitor the situation as it unfolds.”