Credit and political risk insurance “still in heavy demand” from extractive industries

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

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014 and as Editor of The Paper (Pro-Activ Publications' dedicated business newspaper for security professionals) in September 2015. Brian was appointed Editor of Risk Xtra at Pro-Activ Publications in May 2018.

Related Posts