Political Risk Starts at Home

For years, political risk has largely been an international concern, a range of risk scenarios carefully considered by corporations and investors operating in volatile countries and by the insurers that cover them.

But two factors—an increasingly sharp partisan divide in the United States, coupled with major changes underway from the new Trump administration—have pushed political risk in the United States to greater prominence for decision-makers across many industries.

The heightened risks include a continuing erosion of institutional trust, a break in faith in government that kindled the conditions for events as ideologically and operationally distinct as the Black Lives Matter protests in 2020 and the U.S. Capitol riot in 2021. This spring has already brought widespread demonstrations over administration policies, increasing the potential for civil unrest that could prompt President Donald Trump to follow through on talk of using the military to quell disturbances.

In early April, Trump announced tariffs on dozens of countries, which drove the Dow Jones Industrial Average and other stock markets into steep dives for several days and produced quick retaliation by nations such as China. Ongoing tariff wars with major trade partners could spur another recession, push prices for consumer goods higher, and disrupt supply chains for, among other things, auto manufacturing and repairs and construction—all affecting insurance premiums and coverage decisions.

There are also rising challenges from climate change that are potentially exacerbated by the United States’ second withdrawal from the Paris Agreement and its greenhouse gas emissions reduction goals and by the renewed emphasis on fossil fuels over alternative energy. Some observers fear these conditions could soon lead to unseen levels of food shortages in the United States because of crop failure and even greater demands for disaster relief after severe storms.

In addition, there’s an ongoing risk of major, widespread disruptions to the energy grid from a cyberattack or insufficient capacity to meet rapidly growing demand. These are two chronic concerns that require regulatory oversight by the Trump administration and Congress and, if not addressed, could lead to extended outages and civil unrest with potential looting and extensive property damage.

A full list of identified U.S. political risks is daunting. From the perspective of some risk analysts and observers, these risks are greater in aggregate than this nation has experienced in decades—perhaps ever.

“I think the accumulation of different types of risk factors at the moment is pretty unprecedented,” says Mark McLeod, Marsh’s U.S. political risk and structured credit practice leader. “One of the outcomes of that is that it makes it very difficult for businesses to prepare in exactly the right way because you can’t really contemplate all of the contingencies.”

For businesses assessing risk, a sense of uncertainty about various public policies—in energy, law enforcement, tariffs, and more—is palpable as the new administration exerts more authority in Washington, D.C.

“There’s much less consensus and consistency these days from one administration to the next,” a mining executive said in a 2024 political risk survey from WTW. “Polarization means each party’s main objective is to undo the policies of the other one, so it’s impossible to know what the policy situation will be more than a couple of years ahead.”

Control Risks, a global risk consultant, echoed that sentiment in its 2025 report “Uncertain States of America,” noting that even among states, divisiveness breeds uncertainty. “Opposition-controlled ‘blue states’ will increase their efforts to counter and nullify federal and ‘red state’ policies, driving further political polarisation and regulatory complexity,” the report states.

While others interviewed in the months since the 2024 election are more sanguine about the degree of U.S. political risk, saying it appears less volatile than the 1960s or similar eras of disruption, there is a common thread across the insurance industry—all see a climate of significant uncertainty and a need to be vigilant and proactive.

Robert Hartwig, an associate professor of finance and director of the Risk and Uncertainty Management Center at the University of South Carolina, believes agents and brokers have become more aware of the changing landscape in recent years.

“I’m confident they’re going into 2025 with their eyes wide open on these matters,” he said prior to Trump taking office, “but because there’s not a lot of precedent for many of these, it’s hard for them to actively underwrite in a way that would allow to avoid assuming too much of this risk or avoid undercharging. There’s a lot of underwriting challenges associated with all of this.”

For some insurance clients, these concerns are fairly new. In the summary of its 2024 political risk survey, WTW recalled that at the start of the decade, there was a tendency toward denial about the degree of political risk here and abroad. Only 30% of the multinational companies in the survey expressed concern about political violence risk, one of multiple areas of growing concern domestically.

Now, WTW said, “An overwhelming 96 percent said they have added new political risk management capabilities this year,” including hiring additional risk analysts and establishing cross-functional teams to research and monitor political risk.

In 2023, a survey by the Brookings Institution and the nonpartisan States United Democracy Center found that 90% of major institutional investors believed that threats to democracy in the United States are rising and that only 45% of public corporations “are well-prepared to handle political risk to their businesses in the U.S.”

Stephen Davis, a senior fellow at the Harvard Law School Program on Corporate Governance, has written extensively about U.S. political risk and is one of many industry observers who contend insurers and corporate leaders must focus on the increased potential for unrest in the United States.

“The risk of civil unrest stemming from a potential disputed 2024 election has eased, but there remains an elevated risk of political instability owing to the historic closeness of majorities in both houses of Congress and the near-record loss of trust in the court system and traditional media,” Davis said in response to emailed questions. “This erosion of confidence in institutions associated with democracy is matched against a potentially polarizing agenda from the new administration.”

That polarization is the talk of many across industries. “Past experiences, such as the chaos caused by Trump’s travel bans, highlight the disruptive impact that political events can have on our business operations,” a leader in the oil and gas sector said in the WTW survey. “Managing this uncertainty and its potential repercussions is currently our most significant challenge.”

Social Media Spread

The potential for civil unrest and resulting financial liability is a commonly cited concern—with disputes over Trump’s economic policies, immigration enforcement tactics, positions on conflicts in Israel and Ukraine, and retreat from climate change mitigation named as some of the possible flash points.

The protests over the killing of George Floyd by police in Minneapolis in 2020 set a record for insured losses, even when adjusted for inflation— as much as $2 billion, according to the Insurance Information Institute. Rioting and property damage lasted almost two weeks and included 20 states, surpassing the previous record of loss during the multiday riots in Los Angeles in 1992, which also occurred in reaction to police force, when the four Los Angeles police officers who had brutally beaten Rodney King on camera were acquitted.

Sam Wilkin, director of political risk analytics at WTW, and others in the industry say the risk for civil unrest is growing in part because social media can quickly spread news of events like Floyd’s death across the country and around the world.

“Social media has turned protests into something that is incredibly difficult to control,” Wilkin says. “In order to control protests, you need barriers in the right place, and you need police in the right place, and a million people can change tactics on the fly.”

Claire Fisher, a crisis management underwriter specializing in strikes, riots, and civil commotion (SRCC) coverage in the United States for Aspen Insurance Group, concurs that social media platforms act as a catalyst for riots and protests. “Carriers saw this in the 2023 French riots, following the death of Nahel Merzouk by a police officer, when a video was posted online. Soon after, mass protests broke out and municipal assets and vehicles were attacked. As insurers, we often need to be thinking 12 months ahead given our policies are annual.”

The rapid spread of misinformation and disinformation is also viewed as a factor in the increased potential for civil unrest. It’s somewhat akin to meme stocks, where online posters artificially raise the value of companies for their own benefit, Wilkin observes.

In an episode of The Political Risk Podcast shortly after the election, Marvin Barth, founder of the global analytics firm Thematic Research, said misinformation isn’t the sole cause of such unrest, a sentiment echoed by others. “That’s a little bit like blaming a bullet for a murder,” Barth said, citing riots last year in the United Kingdom following false claims online that a Muslim asylum seeker was responsible for a deadly attack on three children in Southport. “Yes, the misinformation was the proverbial match that lit the fire, but clearly people were deeply upset and on edge for some other reason.”

Disagreements over what constitutes free speech on social media also bear watching. Facebook and X, in particular, have reduced monitoring of posts and eased community standards to allow more controversial views, including hate speech. All can foster civil unrest.

“We know that individuals can be radicalized online,” Hartwig observes. “That’s actually not something new, that’s been happening for quite some period of time now. The question is will that intensify.”

Nonviolent protests against Trump administration policies—from immigration to the large-scale firings of federal employees—have occurred regularly in the early months of 2025. Hundreds of thousands of people are estimated to have protested in cities across the country in a day of activism on April 5. While these have been strictly peaceful events, there are multiple root causes that stakeholders note as potential signals for unrest.

Flash Point: Economic Inequality

Economic inequality is a growing concern, according to research by reinsurer Chaucer, which reported that protests and demonstrations by U.S. unions and workers rose 30% last year, increasing to 3,060 from 2,351 in 2023.

Economic concerns may have played a role in the murder of UnitedHealthcare CEO Brian Thompson in midtown Manhattan last fall—or at least in its aftermath. To the surprise of many, the suspect in the shooting was turned into a folk hero on social media by some Americans upset with health insurance companies.

“The public reaction to the murder was a shock to the corporate world and exposes the underlying anger stemming from income inequalities and elites perceived as unresponsive,” Davis says. “There is a dangerous ‘overturn everything’ tension fanned by social media. Portfolio companies have every reason to seek to mitigate hostility towards them, and to protect those exposed to such hostility if they can’t.”

Wilkin says the risk from civil unrest to property is “unprecedented” and will require a “major adjustment” by the insurance industry.

Flash Point: Police Force

Of particular concern for 2025, says Aspen’s Fisher, is further unrest related to excessive police force that precipitated the BLM protests. Without further reform, she adds, “this issue will remain a key concern until protesters feel that their voices are heard.”

In a similar vein, Hartwig at the University of South Carolina says major changes underway at the FBI should be watched closely. FBI Director Kash Patel’s talk of broadening agency power and his perceived focus on administration critics raise the potential for civil unrest. Trump’s talk of using the military to quell demonstrations and assist in the roundup of undocumented immigrants is also a potential flash point, Hartwig adds.

Regarding the potential liability of those in charge of law enforcement, “Private insurers insure many municipalities, including their police departments, around the country and various types of directors and officers liability also could come into play,” Hartwig says, adding the detention facilities and their staffs also could be affected.

Flash Point: Political Violence

Many Americans feared that a Trump loss last November could cause a repeat of the U.S. Capitol violence after the 2020 election. That was averted, Barth noted on The Political Risk Podcast, but “we’re not out of the woods yet.

“We did have three assassination attempts on…Trump, so it wasn’t like there wasn’t any political violence, right? One of them almost succeeded,” he said, referring to a shooting during a July 2024 campaign rally in which one attendee was killed. Barth added that there likely would have been “massive violence” if the bullet hadn’t only grazed Trump’s ear.

Barth said violence from the right remains a risk, as does violence from “the left-wing radicals who have been fed a steady diet for the last eight years that Trump is literally the reincarnation of Hitler.”

He added, “Both sides are extremely mistrustful of each other, and the sad fact is both sides have actually armed up a lot.”

Flash Point: Diminished Resources

The Trump administration has been steadily dismantling climate mitigation efforts put in place by previous administrations, the results of which could not only affect insurers’ underwriting capabilities but also present more opportunity for civil unrest.

For example, budget cuts led by Elon Musk’s Department of Government Efficiency have included weather forecasting capabilities at the National Oceanic and Atmospheric Administration. Some insurers, Hartwig says, “rely on government-generated data and information to understand some of their exposure to risk.” Similarly, the agricultural industry depends on forecasting for crop planning, resource management, and preparation for severe weather events. Weather balloon launches have been suspended or reduced because of budget cuts, and some fear the reduction will affect the reliability of forecasts.

McLeod worries that insufficient action on climate change—including a renewed focus on carbon-emitting fossil fuels rather than cleaner alternative energy—could spawn civil unrest as the agriculture industry endures droughts and other weather-related stress, leading to food shortages and supply disruptions.

The state of America’s energy grid is also a grave concern, he says. The risk is enhanced over five to 10 years, in part because energy consumption is increasing at a pace that current capacity can’t sustain.

A December report by the North American Electric Reliability Corporation concluded that more than half of the United States and Canada could face power shortages in the next few years. Trump’s streamlined approach to regulatory approval could expedite construction of new electric generating facilities, but capacity growth is often hampered by local political opposition to specific plants, energy sources, and transmission lines, and the new Trump tariffs will exacerbate existing shortages of key parts like transformers, circuit breakers, and switchgears, according to Scientific American.

The potential for a crippling cyberattack on the energy grid or other critical services also remains a high concern. Regulatory oversight of security is considered critical to mitigating the risk, as is continued vigilance to safeguard against adversaries like Russia and China. Trump recently said he no longer considers Russia a cyber threat to U.S. infrastructure, a claim disputed by many experts who have documented frequent intrusions and sabotage by state-sponsored agents.

Hartwig also believes “insurers are going to need to be vigilant on the domestic front” because such threats no longer emanate just from foreign hackers.

As outages occur and as shortages of food and other basics emerge, the potential for civil unrest is high. “When people don’t get those things for a short period of time, things escalate quite rapidly,” McLeod says.

Casting a shadow over all political risks is deteriorating public confidence in the ability of our nation’s leaders to manage a crisis.

“Democracy doesn’t really work without the bulk of the population believing that they’re in the democratic process and that their vote counts and that the politicians that are representing them have their best interests at heart,” McLeod notes.

Hartwig, for one, is confident the insurance industry is equipped to rise to most of the challenges arising from these heightened risks. However, he and others stress that major adjustments may be on the horizon.

“The risks are generally covered by the types of products that we see out there in the market today,” Hartwig says. “Whether or not the typical limits are fully adequate is another question in this new environment.”

Innovation through the use of analytics, quick pivoting to respond to emerging risks via tools like social media monitoring, and continued vigilance and reassessment of coverage needs will be essential. “It’s a period of really heightened uncertainty for any business, no matter what side of the aisle you’re on,” McLeod says.

Watch Your Policy

Fergus Critchley, head of crisis management for North America at WTW, says changes are underway for SRCC coverage, which has historically been embedded in property and liability coverage with almost no restrictions.

According to Critchley, some insurers are including broad terrorism exclusions, which bring into contention whether certain SRCC losses fall into these definitions. “In more recent years there’s been a lot of movement by other insurers not in the specialty market to include social and economic motivations within their definition of terrorism, which when terrorism is excluded, present a potential gap in coverage,” he said.

Critchley said buyers should review their insurance program if relying on traditional policies to sufficiently cover an SRCC loss and look alternatively to the specialty market for comprehensive coverage for not only such events, but additional perils only found within the political violence market, such as insurrection, civil war, and war.

Wilkin says the United States one day may have to supplement the insurance industry’s coverage of property damage from demonstrations, similar to how the federal government aids uninsurable or underinsured victims of natural disasters. Such backstops are now provided in several countries around the world. “It’s happened in South Africa, it’s happened in Chile, and it looks like it’s starting to potentially happen in France,” he says.

Risk Management

Critchley said he expects greater emphasis on insurers preparing themselves and their clients for SRCC events. “I think the innovation in our space has really come from the deployment and the development of analytics to be able to better characterize civil unrest and to be able to better estimate the potential loss,” he said.

That’s already happening to some degree, he says. “Some of our clients are major transportation networks in cities and we’ve seen them on a proactive basis monitoring social media and other data to be able to understand where and when potential protesters are going to congregate and have diverted them to areas of less challenge from a policing point of view and a security point of view.”

Monitoring social media for potential flash points, such as George Floyd’s death in Minneapolis, is also a growing trend, enabling insurers to alert clients to heightened threats of unrest and ready resources to respond to any claims from potentially vulnerable areas.

Building resiliency is a growing interest for clients, according to Critchley.

“We’ve done very specific threat assessments to be able to help clients understand those risks and then be able to utilize capital spending to be able to harden buildings,” he says.

These measures, much like those that schools undertake to mitigate shootings, include steps such as restricting access points to buildings, erecting temporary barriers, and training staff on emergency responses. “Some insurance brokers and insurers have partnerships with either internal or external risk advisory teams that are helping to train clients both at the executive level and at the employee level,” Critchley says.

Firms like Gabriel Protects and KT Security Solutions are engaged in such technology. Services include bulletproof walls that can be rearranged quickly to provide a safe room during threats and computerized systems that detect gunshots and can alert law enforcement and rescue personnel and provide them with instantaneous views of a building interior.

As brokers work with clients in this landscape, these risk management tools become an ever more important part of their focus to ensure clients are covered and protected from civil disruption and other politically charged risk.