In a yr many pundits are calling the ‘Superbowl of elections,’ political danger virtually oozes from the soil.
All through 2024, electoral contests are slated, or not too long ago concluded, in additional than 100 international locations. Anticipating potential coverage modifications these elections would possibly set off has P&C business specialists in political danger insurance coverage revisiting eventualities throughout the worldwide chess board.
Canada shares a continent with two of its largest buying and selling companions and is working to increase its international attain. And so the nation’s danger exposures are tied to altering governments.
Dangers vary from probably having to renegotiate hard-won commerce agreements, to sharpening the murky image being broadcast by new alliances coalescing amongst China, Russia, India and a number of other rogue states.
“With respect to China, it’s doable a second time period for former U.S. president Donald Trump might spark a revival and an escalation of commerce wars with China – and never only a U.S.-China problem however type of a West-China stance,” says Laura Burns, senior vp of political danger within the Americas at WTW.
“There’s some concern that there are eventualities the place tensions enhance, whether or not it’s the South China Sea or simply commerce generally.”
Tarif troubles
Manifestations of those tensions surfaced in late August when Canada introduced it might mimic steep U.S. tariffs on Chinese language-built electrical autos, and in addition add a 25% surtax on imports of Chinese language metal and aluminum. China rapidly retaliated with a probe into alleged dumping of canola seed into Asian markets by Canada.
On this continent, observers name Mexico’s new president Claudia Sheinbaum the inheritor obvious to protectionist insurance policies championed by her predecessor Andrés Obrador. If true, Sheinbaum’s administration might create “considerations concerning the overseas direct funding local weather, the place there was some deterioration within the type of expirations – significantly relating to power sovereignty,” Burns says.
From a commerce and funding standpoint, Burns says, Mexico is sort of a story of two international locations. “There are some actually low-risk areas [like] manufacturing, however there are some high-risk areas, significantly round uncommon earth or vital earth minerals,” she tells Canadian Underwriter.
“They’ve nationalized lithium and issues round power sovereignty. These are some key areas for Canadian oil and power [industries].”
Shifting international political priorities might also “create eventualities the place extractive-related actions could also be suspended or prohibited as a consequence of [environmental, social and governance] ESG associated considerations of the brand new authorities,” says Andrew Cadogan, underwriting supervisor for administration legal responsibility and company danger at Aviva Canada.
“It might additionally outcome within the imposition of latest tariffs, which might influence the import and export of products. Whereas not all the time the case, these could also be tied to an increase in protectionism within the overseas nation.”
Whereas Cadogan and different sources notice insurance coverage coverages don’t particularly deal with tariffs, he provides, “it is likely one of the exposures we think about for our insureds from an underwriting perspective.”
World uncertainty
With nations drifting from the so-called maritime order, Canada – given its northerly geography – sits atop a world slowly discarding buying and selling and diplomatic norms in place for the reason that finish of World Battle II.
Living proof, Burns suggests Canada’s pursuit of Indian nationals allegedly concerned within the killing of a Sikh activist on Canadian soil in 2023 might preserve relations between India and Canada frosty – significantly in gentle of prime minister Narendra Modi’s re-election.
“It’s exhausting to know the place these items might manifest. Might we see an interruption of commerce, vis-a-vis export controls, embargoes or different such issues?” she asks.
“Relying on if and the way sure flashpoints have been to escalate, these are some eventualities on the minds of underwriters in our neighborhood.”
Navigating sanctions
As for administration legal responsibility, Cadogan notes the primary problem could be sanctions exposures and any elements that would restrict insurers’ potential to supply providers on overseas soil for non-Canadian subsidiaries or divisions of a Canadian-domiciled firm.
“Typically, insurance coverage providers include overseas and native insurance policies, claims dealing with, and normal servicing of a shopper’s insurance coverage wants exterior of Canada,” he tells CU. “Relying on the nation, the overseas authorities will seemingly have their very own sanctions regime that could be much like these in Canada however will seemingly be totally different than what we now have.
“This might have an effect on an insurer’s potential to transact in, or with, a sure nation.”
He provides his purchasers have operations or subsidiaries within the U.S., and for the reason that firm writes insurance policies in each Canadian and U.S. {dollars}, the U.S. Workplace of Overseas Property Management – a element of the U.S. Treasury Division that screens sanctions – have to be thought of.
“We have to guarantee we perceive the exposures and necessities from an insurance coverage perspective,” he says.
This text is excerpted from one showing within the October-November 2024 print version of Canadian Underwriter. Function picture courtesy of iStock.com/SDI Productions
