WTW: Record capacity underpins resilient CPRI market

The credit and political risk insurance market has access to more capacity than ever before, with notional maximum capacity increasing across the board, according to WTW's Credit and Political Risk Insurance Capacity Survey and Market Update.

When asked about exposures, 32 CPRI insurers detailed their top three countries by exposure, with the US, UK and Nigeria ranking first, second and third respectively. All 49 respondents listed their top industry exposures, which were financial institution, sovereign, and oil and gas.

“The fact that we are seeing a continued and steady increase in capacity within the CPRI market denotes its stability as well as the market’s confidence in this sector,” said Emma Coffin, head of broking, global financial solutions at WTW. “Each of the three main CPRI perils, contract frustration, transactional credit and political risk, have experienced growth over the past two decades through various market cycles, across the Covid-19 pandemic and the resulting lockdowns.

“Oil and gas has declined from first place to third place in respect of top industry exposures and this survey also highlights a marked rise in renewables and ESG with a positive shift in the number of markets able to support clients with challenging financing structures. We foresee all these positive trends continuing in 2023.”

In numbers (Source: WTW)

In January 2023, the risk intermediary polled fifty-eight insurers across Lloyd’s and company markets. Of these, 49 expanded on their appetites and capabilities as at 31st January 2023. The survey was bolstered by WTW’s own databases alongside commentary based on its interactions with insurers throughout 2022.

WTW's survey highlighted a substantial increase in total notional CPRI capacity as at 31st January 2023 with:

• Approximately US$4bn contract frustration total notional capacity available per transaction, up from US$3.4bn this time last year (20% increase)
• 17% increase in transactional trade credit (to US$3bn)
• 37% increase for non-trade credit (to US$2.2bn)
• Overall political risk capacity up by nearly 15% to almost US$4bn
• Increase in capacity across all tenors generally, but there is particular growth in contract frustration where notional capacity for 15-year tenors is US$2.5 billion versus US$1.8bn for the previous year (37% increase)

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