Because of these current developments, credit and political risk insurance has become increasingly important. It helps companies continue to trade and invest, even when uncertainty is high. It not only provides protection, but also enables companies to continue making strategic choices in a complex and dynamic environment. SRG's Credit & Political Risk team plays an important role in this regard. They help develop insurance solutions that protect companies against both non-payment and political risks. Instead of using standard products, they focus on tailor-made solutions that fit the client's specific situation. This may relate to international trade, financing structures or long-term investments in countries with a higher risk profile. For banks, this can also help reduce the amount of capital they have to hold under applicable supervisory rules.
Protection
SRG's solutions are relevant to a broad group of organisations, including large international companies, national corporations, banks and (semi-)government institutions. Specifically, for companies, this means that they can protect themselves from non-paying customers while continuing to operate safely in emerging markets and grow in countries with higher levels of risk. Banks and other lenders benefit by being able to spread their risks better, provide longer financing and optimise their balance sheets and capital positions.
Insurance as a tool
The demand for credit and political risk insurance remains as high as ever. This is not only due to ongoing economic uncertainty, but also because these insurances are increasingly used as risk management and regulatory tools. Companies and banks are not withdrawing from international trade; instead, they are choosing to protect themselves better and remain controlled active in risky regions. Although many insurers are still active, their attitude has become more critical. The preference is for well-structured and transparent transactions. In doing so, price trends remain relatively stable, with lower rates for safe risks and higher premiums in markets where demand for cover is high, such as in countries like Côte d'Ivoire.
Trends
At the same time, clear shifts are visible in the market. The focus of both insurers and customers is changing, increasingly focusing on specific themes and sectors. Key trends include:
- more focus on renewable energy and energy transition
- more structured trade finance
- less interest in large, general risks in governments
Despite these shifts, insurers remain willing to cover complex political risks, provided the structures are legally sound and clearly defined.
Take advantage of new opportunities
Precisely because these insurance policies are increasingly being used for strategic purposes, the importance of sound advice is growing. Minor differences in policy terms and conditions can have major consequences, for example in the event of claims or in the way banks are required to calculate their capital. The SRG team therefore ensures that solutions are not only legally sound, but also practically feasible and aligned with the client’s objectives. Credit– and political risk insurance is thus evolving from a purely protective instrument into a strategic tool. It enables companies and banks to continue trading and investing with confidence, even in a world characterised by uncertainty and change. SRG continues to support its clients in navigating this complexity whilst, at the same time, capitalising on new opportunities.
Courtesy of Edward Nicholson, Managing Partner, Credit and Political Risk SRG