One of the challenges faced during 2020 in underwriting non-payment insurance was convincing Structured Credit and Political Risk (SCPR) insurers to accept new clients, says Mr Matthew Solley, managing director, Structured Credit and Political Risk, at Gallagher.
Writing in the report, “Structured Credit and Political Risk Insurance -- Report and Market Update” released recently by Gallagher, he said, “With insurers’ conservative stance, several held back from writing business from new insureds, preferring to support entities with whom they had experience.”
He added, “Whilst the SCPR insurance market has not been hit by the torrent of losses that it feared, it maintains a cautious approach driven by the broad impact of COVID-19, primarily on existing exposures as opposed to new underwriting. There remains good opportunity to leverage the capacity of the insurance market, understanding that underwriters are looking more closely at the entities they insure with a focus on expertise, alignment of interest and transparency.”
Countries of concern
Among countries of concern due to government non-payment, Zambia (56%) continues to top the list, followed by Angola (40%), according to the report.
“Both Zambia and Angola remain at the top of the list due to unsustainable levels of government debt and the significant threat of default,” said Gallagher. “Despite this, in relative terms underwriter perception of Angola has marginally improved since mid-2020 as a result of the increasing oil price.”
Other African countries of concern regarding sovereign non-payment are Ghana (19%); Tanzania and Kenya (14% each); Ethiopia and Zimbabwe (7% each); Gabon 5%; Algeria, Cameroon, Ivory Coast, Egypt and Malawi (2% each).
Gallagher surveyed the SCPR market by gathering feedback from 63 underwriters spanning 49 insurers between 12 and 21 January 2021. Respondents were asked to name the three countries in their portfolios which currently concern them the most with respect to the risk of non-payment of government obligations.