Gallagher’s Structured Credit and Political Risk semi-annual Market Update informs our clients, both existing and prospective, of the capacity available in the commercial insurance market. Capacity is broken down between each insurer (whether Lloyd’s syndicate or insurance company) showing their maximum line size and policy tenor, as well as the category of insurance (see Product Glossary). As such, insurance buyers are more informed when considering the ability of the insurance market to support a potential investment or transaction.

The Gallagher Market Update for January 2019 summarises changes in capacity and tenors available from commercial Credit and Political Risk insurers since our last report in July 2018. The summary reflects the outcome of reinsurance negotiations, where renewals have been completed in the intervening period, as well as the arrival of any new insurers who have gained approvalfor their business plans. Changes to credit agencies’ ratings of the insurers, as well as market moves, are also highlighted. The information presented throughout this report is sourced directly from the market to ensure the data is accurate and relevant. This is complemented by BMI Research (part of the Fitch Group) who provide expert macroeconomic, industry and market analysis.

Current Themes

Economic and political uncertainty continues to be a theme high on the agenda for multinational corporations in 2019, and, with it, the growing demand by businesses to utilise risk mitigation tools to protect themselves in an increasingly unpredictable environment. Along with escalating tensions in international relations, the impending exit of Britain from the European Union adds to regional and global uncertainty. These, accompanied by the continued volatility in commodity prices, changes in various political establishments, and looming critical debt positions across many countries are just a few reasons why economic and political concerns will remain at the forefront of thinking throughout 2019. By definition, an environment of heightened economic and political risk means an increase in the volume of underwriting opportunities for Credit and Political Risk insurers. Conversely, for prospective clients, this means insurers are likely to be more selective on which transactions to support. As an example, we reported in our last edition that we had seen a cooling of appetite for unsecured medium term private obligor credit risk. Whilst this has not reduced further, we are yet to see a demonstrable uptick. Another theme of the current climate, and perhaps a result of the increase in the sophistication of insurers’ underwriting capabilities, is the increasing breadth of the application of the relevant products. A change in the Lloyd’s regulations (see further commentary) has broadened Lloyd’s syndicates’ ability to support a wider variety of underlying financing structures resulting in the increase in the underwriting of what had previously been less familiar lending classes and unsecured credit for higher quality counterparty risk.

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