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As recent news makes strikingly clear, today’s world is becoming increasingly volatile and fraught with risk. Being part of the trade industry in this unstable geopolitical environment requires adaptability, resilience, and risk management, making insurance more necessary than ever.
At the annual Women in Trade, Treasury, and Payments Conference on 27 February, Trade Finance Global (TFG) spoke to Sanda Blanco, Head of Structured Credit, Political Risks and International Bonding at Howden, about the most important political risks of our time and how bespoke insurance can help businesses thrive in face of them.
A new world order
While the international geopolitical landscape is inherently volatile, the last few years have seen unprecedented shifts at breakneck speed. From conflicts to regime change and economic shocks, constant change has made it more and more difficult to predict what’s coming next and adjust to it. “I have witnessed this – conflicts, wars, financial crisis – but not all at once with this global reach,” said Blanco.
In the past 20 years, the world has also become more interconnected than ever – meaning shocks in one region quickly send waves across entire industries around the world. The world’s growing reliance on international trade, for example, meant that the Russia-Ukraine conflict had profound consequences on food supply around the world, from Europe to Africa; other conflicts near crucial trade routes or economic shocks in large economies can also have immediate, almost unpredictable effects on countries thousands of miles away.
This change has effectively led to a “new world order” and caused a decline in trust among nations, institutions, and politicians. Fear of change has increased polarisation – as recent US and German elections show – and eroded trust between people, making the global situation even more precarious.
Bespoke risk management: the way forward
With more unpredictability comes more risk, which businesses must monitor and mitigate to stay afloat. Insurance brokers and underwriters, like Howden, can help by forging relationships between companies and insurers and helping companies find the coverage they need to continue working.
Howden focuses on long-term insurance, creating bespoke solutions for clients tailored to their specific needs. This means the Howden team must get to know the client, insurer, and the underlying transaction thoroughly to create a solution that addresses the client’s needs and risk appetite. This is what makes the relationships between brokers and clients so crucial, especially in a world where trust is dwindling: only through strong, collaborative relationships can brokers understand the client’s needs and how underwriters’ products can match up with them.
The future of risk: tech, diversity, and inclusion
As insurance becomes increasingly important, so does ensuring that all companies have access to the right type of coverage. Leveraging technology is crucial to connecting firms to insurance providers, enabling them to find solutions that work for them without having to go through long, inefficient processes.
Howden has been building a range of platforms to provide businesses, especially small and medium-sized enterprises (SMEs) with specific insurance cover, like a recently announced platform to protect UK firms against renewable energy risks, or two unique digital platforms: Tepfin X, a Lloyd’s of London approved trading platform and a completely new way for its clients to access the Structured Credit & Political Risk Insurance market for their high volume businesses. The aim of this was to overcome the traditional inefficiencies of the insurance market in quoting and placing these business lines, to give clients instant certainty and speed of access to available insurance capacity, which they can leverage to maximise the value of their commercial opportunities and Dynamite, a data management system for Structured Credit & Political Risk Insurance.
Increasing accessibility will only become more important in the next few years as demand for political risk insurance is set to soar. Even though many businesses are slowing down on globalisation, instead resorting to nearshoring and restructuring supply chains to decrease geopolitical risk, global uncertainty remains high.
This is likely to lead to a boom in political risk insurance, an inherently countercyclical industry: “The safer the world looks like to banks, traders, and investors, the less the clients feel they need to buy political risk insurance,” said Blanco. Vice versa, increased risk means increased demand for insurance cover; the industry’s profits will depend on the insurers’ appetite, capacity, and prices, as well as the different types and levels of coverage they offer. These may need to change over time, adjusting to new risks cropping up globally and adapting to clients’ demands.
Looking inward, the insurance industry must also continue in its progress to include more women in leadership roles: a recent survey found that only 37% of boardroom positions in Europe’s top insurance companies are held by women, and 80% of insurance companies have women make up less than a third of executive teams. Diversity, Equity, and Inclusion policies are doing some of the work in drawing attention to and decreasing the gender gap.
Some women, however, have taken matters into their own hands: Blanco founded a group for women working in international bonding and guarantees, which grew to have 50 members just a year after its founding. The group lets women in all positions, ages, and areas of the sector meet each other and offer advice and support: “It’s so rewarding to see the impact that your own experiences, the good and the bad ones, can make in someone that is only starting in the sector as a woman,” said Blanco.
