Capacity in the political risk marketplace has grown steadily since the financial crisis, and at $2.4 billion, market capacity for a single policy of political risk insurance today is nearly twice what it was in 2009, according to Marsh's "Political Risk Market Update." Coupled with strong competition and all-time low pricing, market conditions are favorable toward buyers of political risk.
Increased capacity reflects a shift away from traditional P&C lines toward more profitable specialist classes, Marsh says in its report. Property and directors & officers liability have become crowded with competitors, which contributes toward soft pricing and limited underwriting profits. Specialist lines, however, generally are not affected by swings in the overall insurance market.
Except for 2008 and 2009, combined ratios for political risk have remained below 100 for the last decade — which indicates profitable underwriting results.
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