revisited

As the global business landscape grows riskier, the product is no longer just a ‘nice to have.’ Perils can include terrorism, currency inconvertibility, forced divestiture, and expropriation.

It’s pricey. It takes several months to iron out the intricate policy details. And it usually requires a broker able to weave together a network of global insurance carriers, including syndicates from Lloyd’s of London, with the capacity to write $100 million, multi-year contracts.

Yet political risk insurance (PRI) is garnering mounting attention in C-suites and boardrooms as the global business landscape shifts from open markets, liberal trade, and geopolitical stability to rising conflicts, tariff and trade uncertainty, and economic nationalism.

“Boardrooms are increasingly aware that geopolitical missteps can trigger material financial events, even bankruptcy,” says Laura Burns, head of political risk, North America at Willis Credit Risk Solutions.  “Traditional mitigants like diversification, joint ventures, and bilateral investment treaties are less reliable. Political risk insurance is no longer just a safety net. It’s a strategic enabler.”

Adds Michel Léonard, chief economist and data scientist at the Insurance Information Institute: “Evidence suggests heightened concern and awareness. With more board-level focus on geopolitical risk, supply‑chain resilience, and resource security, many companies are elevating political risk insurance discussions to the executive/risk committee level.”

“CFOs and CEOs are more actively integrating political risk insurance into their risk‑mitigation toolkit,” he adds.

The fundamentals of political risk cover for multinationals remain the same, with protection for the confiscation, expropriation, or nationalization of company property the basic offering.

“These are the catastrophic, total-exit type of scenarios where an insured can no longer operate and bears a loss of investment in the country,” says Gayle Jacobs, senior vice president in the US Credit Specialties Practice at Marsh.

Traditional property insurance excludes losses and damages to physical assets resulting from political violence, war, civil unrest, and terrorism. If a company’s footprint is mostly in developed countries, such as the US, Canada, Western Europe, and Australia, Willis counsels its clients that terrorism and political violence insurance may be enough. But if a multinational’s operations extend into emerging markets in Latin America, the Middle East, Africa, and Asia, its executives may want to consider expanded coverage. This could encompass additional perils, such as currency inconvertibly, forced divestiture, and expropriation, including license cancellations.

In a Willis survey of 66 multinational companies earlier this year, 74% of respondents placed geopolitical risk among their top five hazards. The firm’s analysis of data showed there were 61 international ongoing state-based conflicts in 2025, up from five in 2005, which may have been the peak of the global rules-based order.

Flashpoints

Protection against currency inconvertibility and transfer restrictions that block a company’s ability to repatriate or convert the local currency is a standard part of many multinationals’ political risk package. Clauses that protect again losses stemming from contract repudiation and breach of state and sovereign obligations can be triggered when a host government fails to honor licenses or offtake agreements: the latter crucial for large, capital-intensive projects in industries like energy, mining, and manufacturing as they provide revenue certainty.

But even as the core features of political risk cover have remained the same, the buying environment has shifted substantially.

“This affects how political risk insurance is structured, priced, and deployed,” says Léonard. “There is more focus on the role of political risk insurance enabling investment rather than purely as a ‘nice to have.’” The global business landscape is less benign, he notes: “More geopolitical flashpoints, trade fragmentation, supply‑chain risk, economic nationalism, increased state action/intervention. That means companies report more political losses.”

A new assortment of global tensions and conflicts “have brought the finer points of the coverage to the fore,” says Jacobs, who warns that in a cautious and even combative geopolitical landscape, executives must clearly understand their organization’s direct and indirect exposures to political risk.

West Africa’s military-led governments, for example, are tightening control over natural resources and seeking greater revenue from mining deals. Emirates Global Aluminium was among the latest casualties in August when Guinea revoked a major bauxite mining concession from its local subsidiary and reassigned it to a newly created state-owned company, citing violations of the mining code. Late last year, the Mexican government seized a port and quarry on the Caribbean coast owned by Vulcan Materials, a US construction materials company.

While traditional political risk cover does not insure against unexpected tariffs, it could compensate for retaliatory measures slapped on in response to tariffs. When the US imposed steep new tariffs on China, for example, Beijing retaliated by placing a US apparel company on an “unreliable entity list:” the kind of move that can make doing business impossible. 

Multilateral investment agencies such as the World Bank’s Multilateral Investment Guarantee Agency (MIGA) and the European Bank for Reconstruction and Development can extend guarantees that help investors, lenders, and contractors manage risks that are largely beyond their control in developing economies.

 “Our work continues to be a critical factor in supporting developing countries as they seek to attract and retain private investment,” says Marcus Williams, chief of staff at MIGA. To help investors access its guarantees, the World Bank last year launched the World Bank Group Guarantee Platform, bringing together all of its political risk insurance and credit enhancement expertise and products, including from MIGA and the International Finance Corporation.

Private insurers are increasingly partnering with multilateral investment agencies to meet their reinsurance and co-insurance needs, Burns says. Yet the time involved in closing a deal with MIGA can be lengthy and the private market remains essential for direct corporate coverage.

“Their underwriting is faster, more flexible, and often more commercially aligned,” she notes. “Multilaterals bring a halo; private insurers bring speed and capacity. Together, they’re reshaping the PRI landscape.”

Capacity Grows

Despite the escalation in geopolitical tensions, capacity in the political risk insurance market continues to grow. This year, the total market capacity for equity political risk cover—which US based-companies typically use to cover operations and assets in emerging markets—totalled nearly $4 billion, including $2.23 billion from private insurers and $1.75 billion from syndicates at Lloyd’s of London, according to figures provided by Marsh Specialty. That was up from $3.71 billion in 2024, which included $2.26 billion from insurers and $1.49 billion from Lloyd’s syndicates.

The cost of the product varies widely, but the policies, commonly written for three-year periods, are generally 1% of the limit, meaning a company buying a $100 million policy would pay an annual premium of $1 million, says Jacobs.

Political risk is “the kind of product that has to be sold twice,” says Léonard. “First, we must convince senior management that they need it: that there is a risk.”

Multinationals, particularly marquee names, operating successfully in a market for many years with a good relationship with a local government, may think it unnecessary. After a review of data and detailed assessment of the risks, conditions of coverage have to be drafted and manuscripted to ensure the protection is comprehensive.

“I have seen very few of those policies where capacity, for example, is adequate just from one carrier,” says Léonard. “They normally have to be programs that have multiple carriers, syndicates from Lloyd’s, Bermuda capacity, and so forth.”

The product’s steep cost, which can range from 0.5% to 1.5% of the cover, means the CFO is making the final decision, with the advice of the risk manager. 

“Risk managers will almost always make sure they have the buy-in and the full support of the CFO,” Léonard notes, “so that there is no additional budgeting.”