Claims, Complexity, and a Changing World

BEN GIBBONS: It is a fair challenge, and it is important to be candid about it. Political risk insurance has had a more difficult claims history than, say, credit risk insurance. The nature of the product is partly responsible—you are dealing with non-physical damage perils, peril-specific bespoke policies, and circumstances that turn on the actions or inaction of foreign governments. That creates far more room for contention and misunderstanding than a binary product like credit insurance, where a non-payment event is relatively straightforward to establish.

GIBBONS: Not really—this is not a nascent product. The challenge is arguably the opposite: in some ways, the core policy document has not kept pace with how the world has changed. If you look at the language in use today, it is remarkably similar to policies issued in the late 1980s and early 1990s. Other lines—marine, energy—benefit from standardized forms that have evolved significantly. Political risk has not had that same degree of standardization, which is why specialist expertise in policy drafting matters so much.

The other inherent challenge is that you are rarely dealing with a physical asset that is clearly damaged or clearly intact. When a government increases royalties across an entire mining sector, is that expropriation or a legitimate exercise of national interest? When new regulations apply to multiple operators, is it discriminatory or just policy? These scenarios are genuinely difficult to capture comprehensively in a policy form, and that ambiguity is where gaps and disputes emerge.

HARRY BOWER: The world in which this product was created—fax machines, brick-sized mobile phones, physical communiqués—is unrecognizable compared to today. Governments can shift market sentiment with a social media post. Insurrections can be coordinated over messaging apps. Coups that once took months to organize can unfold with almost no warning. And the destructive capability of modern weaponry is categorically different—losses that might once have been partial are now total.

That creates a real challenge when you are writing policies with tenors of seven years or more. Is the policy we draft today fit to respond to the political risks of 2033? That question has to be central to how we approach these placements. It is not just about the risks that exist now—it is about building in the adaptability to respond to what the world might look like by the time the policy expires.