Welcome to the latest edition of our market update. In this report, we look at global macroeconomic challenges and, in particular, how they have affected risks faced by those trading with or investing in a range of emerging markets (EMs).
We will also provide an update on the Structured Credit and Political Risk (SCPR) insurance market, address changes in capacity, and highlight recent market moves.
Over the past six months there has been a slight thawing in relations between the US and China. Secretary of State Antony Blinken’s trip to China in June was seen as a big step in attempting to improve relations between the two superpowers. Importantly, it was the first visit by a US official to the country in five years, and is in stark contrast to a year ago when Nancy Pelosi, Former Speaker of the House of Representatives, visited Taiwan, in a move that escalated tensions with China. Other nations are also working out their stance towards the country. The UK continues to align itself closely with the US, whereas France has announced its intent to strengthen economic ties with China, with particular emphasis on combating climate change. Even so, the relationship between the West and China remains fractious, namely over Taiwan, support for Russia, tech, and security.
The Russia/Ukraine conflict continues to dominate the news, despite there having been little change to territory this year. Nevertheless, the repercussions of the war continue to be wide-ranging. Of particular significance was Russia’s withdrawal from the grain deal in July, and the subsequent bombing of grain stocks and grain infrastructure in Odessa and Mykolaiv. Ukraine remains one of the largest producers and exporters of grain, with much of its production going to developing economies. According to the EU, ‘over the past year, Ukraine supplied the World Food Programme with more than 80% of all its grain.’ Countries such as Egypt and Somalia are expected to suffer particularly badly and this may lead to an increase in political violence events.
Another impact of the war has been the mutiny of the Wagner Group in Russia and its potential incorporation into the Russian Armed Forces. Aside from Europe, this is principally important in Africa, where the PMC is engaged in Mali, Libya, Sudan and Central African Republic. It is not yet fully understood how the Wagner Group will continue its operations in Africa, although the latest news suggests that they will remain active in spreading Russia’s influence on the continent.
The other main area of interest for the SCPR insurance market is the soaring level of global public debt, which hit 92 trillion in 2022 - a five-fold increase since 2000. The UN Secretary General, António Guterres, recently stated that:
On average, African countries pay four times more for borrowing than the US and eight times more than the wealthiest European economies. A total of 52 countries – almost 40 percent of the developing world - are in serious debt trouble.
Debt remains a key issue in a number of African countries. Ghana has already started to default on its debt, with claims being submitted into the insurance market. Ethiopia and Kenya, two of the continent’s largest economies, are struggling with the burden and both may need to restructure the debt in the coming years. This has already been achieved by Zambia, who have just completed the restructuring of $6.3bn of loans.
Despite this multifaceted risk environment, the SCPR insurance market remains robust. Importantly, capacity continues to hover at near record levels, with more credit capacity than ever before for the right transactions.
Product Glossary
On behalf of our clients, Gallagher’s Structured Credit and Political Risk team arrange insurance products to mitigate the risks arising out of trading, financing and investing - often with a focus on developing markets.
Click below for a full glossary of the terms referenced in this page.
Emerging Market Review
This section, and the commentary on specific countries which follows, has been compiled in association with Fitch Solutions.
Insurance Market Changes
Insurance Capacity Update
The following market capacity data has been compiled by Gallagher from information provided by each insurer to summarise the recent changes in the Structured Credit and Political Risk 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).
All data is correct as of July 2023 and where an insurer has a Lloyd’s and company market platform, their data is not double-counted in the calculation of total capacity.
Insurance Market Moves
COFACE
Sam Rahman has now joined the team from Allianz Trade as a Single Risk Underwriter.
CREDENDO
Marine Perrier has joined as a Senior Underwriter from Aon whilst Kevin Bertrand and Jakub Lawiki have joined from Allianz and ARP (the Polish Industrial Development Agency) respectively.
HDI
James Lole joined HDI as a Senior Credit Analyst, from MUFG and Matt Power has joined as a Credit Analyst from Bank of America. Jimmy Guardino joins as an Underwriter from Markel in HDI’s Singapore branch.
MARKEL
Kubra Ozturk has joined the team as an Underwriter from Marsh.
PERNIX
Hannah Vernon has joined Pernix as an Underwriter from SCOR.
TOKIO MARINE KILN
Sundeep Daddar has joined Kiln as an Underwriter. He was previously head of Crisis Management at WRB.
The Team
Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 119013.