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Market for political risk favors insurance buyers

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Abundant capacity has created a buyer's market in political risk insurance, according to an analysis released Wednesday by Marsh L.L.C.

Capacity has been on the upswing for the last decade, according to “Strong Capacity Drives Buyer's Market for Political Risk Insurance.”

“Globally, market capacity now exceeds $2 billion for a single policy, nearly double the available capacity just six years ago,” the report said.

The increased capacity reflected a shift from more traditional property/casualty insurance lines such as directors and officers liability insurance and property to seek revenue in more profitable specialist lines, Marsh said.

“Insurers are finding those revenues in political risk insurance and other specialty lines that do not correlate with swings in the overall commercial insurance market,” Marsh said.

The report noted that with the exception of 2008 and 2009 — during the depths of the global financial crisis — combined ratios for political risk have generally remained below 100% during the past decade, which indicates profitable underwriting results.

The report also noted that despite problems in high-risk nations such as Libya and Ukraine, “the industry's outlook for political risk remains decidedly positive.”