The credit and political risk insurance (CPRI) market remains resilient amid global uncertainty, according to a new study from WTW.
The CPRI market has access to more capacity than ever before, with notional maximum capacity increasing across the board, according to WTW’s Credit and Political Risk Insurance Capacity Survey and Market Updatereleased on Thursday.
In January, the survey polled 58 insurers across the Lloyd’s and company markets. Of those surveyed, 49 had expanded their appetites and capabilities as of January 31. The survey found that there was a significant increase in CPRI’s total notional capacity with:
- About US$4 billion of contract failures total notional capacity available per transaction, up from US$3.4 billion at the same time last year – a 20% increase
- A 17% increase in transactional trade credit to US$3 billion
- A 37% increase for non-trade credit to US$2.2 billion
- Total political risk capacity increased by nearly 15% to nearly US$4 billion
- Increase in capacity across all tenors overall, with particular growth in contract failure, where notional capacity for the 15-year tenor was US$2.5 billion, up from US$1.8 billion last year – a 37% increase increase
When asked about exposures, 32 CPRI insurers named their top three countries by exposure, with the US ranking first, the UK second, and Nigeria third. All respondents listed their top industry exposures, which were, in descending order, financial institutions, sovereigns, and oil and gas.
“The fact that we are seeing a steady and steady increase in capacity within the CPRI market indicates its stability as well as the market’s confidence in this sector,” said Emma Coffin, head of broking, Global Financial Solutions at WTW. “Each of the three main CPRI risks – contract default, transaction risks and political risk – have experienced growth over the past two decades through various market cycles, throughout the COVID pandemic -19 and the resulting locking.
“Oil and gas dropped from first place to third place in respect of top industry exposures, and this survey also highlights a marked increase in renewables and ESG with a positive change in the number of markets that can support clients with challenging financing structures,” Coffin said. “We see all these positive trends continuing through 2023.”
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