A leading broker has said risk managers cannot afford to ignore the growing political risks which are facing the world as countries across the globe hold national elections.
Sam Wilkin, Director of Political risk analytics, financial solutions at WTW was speaking at a press briefing held by Airmic at its annual conference in Edinburgh to mark the launch of a new report on the political risks.
The report comes as businesses face new threats in the world in a year of almost record numbers of national elections.
Already there have been a number of shocks in strategic nations across the world and Wilkin said that risk managers and their insurers needed to be planning for the impact of other votes in particular the United States where Donald Trump is likely to be challenging Joe Biden for the presidency in November
“The risks around the United States election include the potential for civil disturbance,” he said. “The French have a reputation for targeting business interruption when they participate in civil disturbances but, in the US, when we riot it tends to be major property damage,” he added.
Wilkin said the last major outbreak of politically motivated violence in the USA four years ago caused an estimated $3 billion in damage so the threat to insurers and businesses was real.
“When the report was compiled, we knew it would coincide with the South African, Mexican and Indian national elections each of which would be significant events,” he explained.
“In South Africa the ANC now face a coalition in order to continue to govern and if they are forced into a pact with the far left of left leaning parties we may well see a move to redistribute the nation’s wealth in a way we saw in Zimbabwe and the political violence and risks that came with it.
“Mexico has always been seen by US businesses and the back yard and it is the country where the US believe they have the most business-friendly environment, although that is not a sentiment shared by UK businesses.”
Wilkins said the result of the election which will see the first female president in the country’s history is likely to point to further efforts by Mexico to retain greater control over its natural resources and assets which will impact international business.
It was also the bloodiest election in the country’s history with 37 candidates assassinated before a vote was cast.
“At some point we are likely to see a huge test around social unrest,” he added. “There will be a very big social unrest event in the US or elsewhere which will test insurers.
“The last event in the US as I said resulted I losses of $3 billion while losses Ukraine have been put at $100 billion the potential for a large-scale civil unrest event may result is very significant losses.”
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