Market appetite and capacity updates

As the economic impact of Covid-19 continues to play out, we continue to experience some price increase and more conservative risk appetite across the Credit & Political Risk Insurance (CPRI) market. These changes have been driven by shifts in the perception of credit quality and country risk in anticipation of increased claim activity, as well as the potential for higher reinsurance costs. 

Insurers remain cautious on the risks they accept, with a greater focus on financial return. This is influenced by Covid-19 but also a poor track record of credit losses over the last decade. Moreover, Insurers continue to be more selective regarding the clients they wish to work with, applying greater scrutiny to an insured’s size, influence and track record in a particular sector or with a particular counterparty.

Insurers have also started to direct interest towards areas such as sustainability-linked financing where they have the opportunity to broaden and diversify their exposures and access stable investment-grade debt. This includes sectors such as renewables and optic fibre. 

Notwithstanding, with close engagement from our clients we continue to be able to place business in the traditional high concentration areas such emerging market sovereign debt, oil and gas (upstream & downstream) and commodity trade finance.  

Overall London market capacity for credit and political risks has increased at the start of 2021 with the following new teams now actively writing CPRI business after entering the market in 2020:

• Convex Insurance, led by Navaid Farooq and Murray Ross
• HDI Global Specialty SE, led by Nick Robinson 
• Mosaic Insurance, led by Charlie Mackay and Finn McGuirk
• Nexus (in strategic partnership with Crum & Forster), led by Don Asadorian and David Wright
  
  

Policy wording updates

• The Lloyd’s-mandated cyber-affirmation clause (LMA5408 / LMA5427) is now being included in most policy wordings that do not specify a cyber-act exclusion. This clause simply affirms that a loss due to a cyber incident will be payable; subject to all of the terms, conditions, warranties and exclusions of the policy.
  
  
• The Covid-19 induced communicable disease exclusion (LMA5501) continues to be applied by insurers on a selective basis for political risk cover (but not applied to non-payment insurance). 
  
  
• As a member of the International Association of Credit Portfolio Managers (IACPM) and the Loan Market Association (LMA), Miller continues to support the standardisation of documentation for non-payment insurance through our participation in a dedicated working group alongside key banks, lawyers, insurers and insurance brokers.
  
  

Maintaining seamless client service

Despite the challenges of working remotely, the Miller CPRI team has continued to deliver high standards of service for our clients, replacing face-to-face meetings with regular phone and video calls and maintaining efficient policy execution through the use of the PPL electronic placement platform. 

As part of Miller’s continued focus on process efficiency for our clients, we have also led the testing of Dialogue - a secure and independent digital marketplace, which streamlines the placement of CPRI risks. We strongly believe in using technology that will benefit our clients, which is why we have chosen to embed Dialogue into our service model. For more information about Dialogue, please click below and contact any of the team to discuss further.