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The term political risk and trade credit insurance may conjure images of emerging markets, exotic locales and crisis situations, but stress can occur even in the most well-developed and peaceful economies and nations.
The retail sector, for example, is experiencing financial stress in some developed economies, raising concerns over the credit profile of some companies in the sector.
In a June note following the bankruptcy filing of San Francisco-based The Gymboree Corp., Fitch Ratings Inc. in Chicago said retail difficulties would continue and listed several well-known retailers facing significant challenges, including J. Crew Group Inc. and Sears Holdings Corp.
“Though not a sector in which Ironshore is significantly involved, the retail sector throughout the developed world has gone through a significant review in light of the growth of online shopping,” said Dan Sussman, president of political risk and trade credit for Ironshore Inc. in New York. “You have a lot of concerns about retail in the U.S. and U.K.”
As with any sector that appears to display stress, some insurers are taking a harder look at retail risks.
“Retail is a bit of a dicey space to be in these days,” said James Brache, deputy managing director of credit and political risk for Zurich North America in Denver. “So, we are taking a more selective approach to that.”
Capacity in the political risk and trade credit insurance market continues to grow, driven as much by capital deployment decisions by insurers as it is by political turmoil and global security and credit needs.