BPL Global, the specialist credit and political risk insurance (CPRI) broker, has published its annual Market Insight Report revealing that the oil, mining, metals and extractive industries continue to make up the largest proportion of demand for CPRI coverage. Around one third of all BPL Global’s 2019 enquiries related to these sectors (of which around half were bank-financed deals).
According to the detailed report, this represents a certain level of industry sector concentration risk for insurers writing CPRI business.
Commenting on the findings, Sian Aspinall (managing director at BPL Global) stated: “With many insurers now closed to any coal-related risk, and enquiries for renewables increasing, it will be interesting to see how this trend develops over the next few years. Certainly, we can expect the CPRI market to continue to diversify into new areas over the medium-to-long term.”
The key takeaways from the report are as follows:
*Risks faced by CPRI insurers also continue to evolve, as exemplified by civil unrest in robust economies such as Hong Kong and Chile. Enquiries to cover risk located in OECD countries are also increasing (a continuing development from historical demand for CPRI to cover emerging market risk). This demand accounted for approximately 25% of the broker’s enquiry flow in 2019, with over 10% relating to deals where the US, the UK or France was the underlying country of risk
*Moreover, an analysis of the broker’s live policies shows a 46% increase in its exposure to North America in 2019, which has nearly doubled since January 2018 when it stood at US$1.35 billion. Likewise, its exposure to Europe has increased to US$6.47 billion – up by 75% compared to January 2018 when it stood at US$3.65 billion. On the other hand, the broker’s exposure to Russia has decreased by approximately one third since January 2018 when it was US$1.13 billion, reflecting the increasing impact of international sanctions on the market
*The report also reveals the findings of BPL Global’s annual market-wide CPRI capacity study. While Lloyd’s of London’s focus on the ‘Decile 10’ of the least well-performing syndicates and challenging broader market conditions has led to a handful of insurers exiting the CPRI market, there remains strong capital support for this class of business. Overall maximum per risk capacity has remained stable in 2020 compared to the two previous years with the trend towards more medium-term capacity continuing
*Banks and financial institutions continue to represent the bulk of claims collections since the 2008 global financial crisis. Across the market as a whole, just over U$3 billion across 486 claims were settled to such entities between 2007 and 2018