Pricing for trade credit and political risk insurance is softer now than in recent years due mainly to increased capacity and a favorable loss history despite the world growing more dangerous.

Softer pricing for such insurance is “an anomaly really, because if you look at political risk, it's clearly risen. The world seems to be a riskier place from a geopolitical standpoint,” said Evan Freely, managing director and global practice leader of credit and political risk at Marsh L.L.C. in New York.

“There is definitely increased capacity in the market, both on the primary and the reinsurance side, and that did have an effect on pricing and rates,” said Karsten Herrmann, senior vice president and manager of political risk and trade credit at Munich Reinsurance America Inc. in Princeton, New Jersey.

Buyer inquiries remain strong.

“There is absolutely more interest” in trade credit and political risk, said Roger Schwartz, senior vice president of Aon Risk Solution's political risk practice in New York.

“Certainly, over the last 12 to 24 months, it's been an ongoing type of situation in the Middle East and Ukraine,” said Mr. Schwartz, naming two volatile regions.

“Demand in the first quarter has been robust, definitely well above the same quarter last year,” said David Anderson, senior vice president and director of global business development of trade and political risk at Zurich North America.

“Ukraine is very difficult right now. There are some countries where political losses are actually flowing in as we speak, and Ukraine is one of them,” he said.

Several sources also named Venezuela, which ranked last at No. 130 on FM Global's recent “2015 Global Resilience Index” measure of supply chain resilience as the most difficult nation in which to secure coverage currently.

“What you definitely see in the market is more awareness about the product, especially political risk,” which is leading to increased cedent inquiries, Mr. Herrmann said.

Despite recent advances in nuclear proliferation negotiations with Iran, sources said continued sanctions prevent underwriters from even considering covering operations in the nation.

“As a sanctioned country, Iran has been off limits for most underwriters in the market for years, and one has to consider: Will there actually be a deal causing sanctions to be removed?” Mr. Anderson said.

Capacity for expropriation of assets or political violence that affects assets has had “a big increase over the last five years,” Mr. Freely said. Today, it's $2.4 billion to $2.5 billion for a single occurrence vs. roughly $1.4 billion five years ago.

Mark McLeod, New York-based political risk and trade credit underwriter at The Hanover Insurance Group Inc., which binds risks through its Chaucer syndicate 1084 at Lloyd's of London, provided similar figures.

For the protection of a physical asset such as an industrial installation in a third-party country against damage or confiscation, there would be roughly $2 billion in per occurrence capacity in the marketplace, said Mr. McLeod, though it would likely require a large syndication of many insurers to achieve such a limit.

Payment risk, which covers risk of nonpayment for an exporter or contractor working abroad, has approximately $1.2 billion in capacity today, Mr. McLeod said, again with broad syndication. For corporate counterparty risk, limits would be roughly $700 million to $800 million, he said.

In addition, many such policies are customized to meet specific needs.

“Political risk policies tend to be manuscripted because the exposures tend to be different for each customer,” Mr. Anderson said. “As a result, in political risk you end up having quite a bit of innovation with each transaction.”

More precise figures are difficult to ascertain for the market due to the individual, disparate nature of the risks as well as the condition that most or all such policies have nondisclosure agreements, limiting available information.

In its “Report and Market Update: Credit and Political Risk Insurance January 2015,” Arthur J. Gallagher & Co. found that capacity has increased 2.3% to $2.27 billion per occurrence as of January, up from $2.22 billion last July.

The market for such risks is “really robust and well-capitalized,” said Mr. Freely, leading to softer rates, with premium rates off up to 30% over the past five years.

“I also believe that because general property and casualty rates have been trending downward, that this seems to be an attractive alternative, niche product for the carriers to move into,” he said.

After losses associated with financial crises in 2007 and 2008, the trade credit market has “not been loss-making,” Mr. McLeod said.

“It has generally been profitable since the financial crises, and that's made it an appealing class of business for some insurers to come into, so capacity in the market has increased quite dramatically over the past two to three years,” he said.

“It's still being seen as a very attractive marketplace, which attracts new capital and new capacity,” Mr. Herrmann said.

Trade credit insurance is “a critically important financial tool,” said Hank Watkins, president of Lloyd's America Inc. in New York.

“By removing the risk of nonpayment by a foreign buyer of goods or services, this insurance provides lenders with a form of collateral they wouldn't otherwise have. This, in turn, encourages lending to businesses seeking to penetrate emerging but potentially risky markets.”