Political risk is infrequent but can be catastrophic – so why don’t more companies carry coverage for it?
Political risk is a fact of life for companies in today’s globalised world. Thirty-five per cent of companies surveyed by Willis Towers Watson – and 55% of those generating more than $1bn in annual revenue – have suffered losses due to political risk in recent years.
Despite the awareness, only 25% of companies (or 41% of large companies) said they use political risk insurance. The top reason for forgoing it was a focus on other methods of risk mitigation, such as avoiding investment in particular countries. Other reasons for not purchasing political risk insurance included the perception that the coverage offered wasn’t sufficient or that the company’s exposure to risk wasn’t high enough to warrant insurance.