WTW’s risk advisory and insurance brokerage arm Willis has released its latest Insurance Market Reality Reportexamines how geopolitical tensions and the continued expansion of digital infrastructure are impacting the global insurance industry.
Willis said in the report that political risk is becoming a broader concern in the international market, and its impact extends beyond individual industries to supply chains, infrastructure and financial systems.
The company noted that recent developments in the Middle East are expected to affect pricing in the political risk insurance market, with premiums in the Gulf countries expected to rise by 20% to 30%.
Pricing for traditional political risk insurance and trade interruption insurance is likely to remain stable or increase slightly by up to 5%, Willis added.
Insurers are increasingly assessing risks from a national security perspective, while organizations are placing greater emphasis on political risk insurance within their broader enterprise risk management strategies, Willis said. The company said geopolitical developments continue to impact global markets through changes in regulation, investment flows and operational stability.
“Geopolitical uncertainty is no longer a background risk. It is the primary driver of volatility across insurance markets,” commented Jackie Bolig, Head of Placement and Brokerage Solutions, Enterprise Risk & Brokerage, North America. “From supply chain disruptions to energy security and regulatory disagreements, we are seeing global events translate into real, direct impacts on risk and costs. Organizations need to evolve their risk strategies to adapt to a world where disruption is faster, more interconnected and less predictable.”
Willis also highlighted the growing role of technology-related risks. The company said growing demand for artificial intelligence and cloud services is driving significant investment in data centers and digital infrastructure, which are now widely viewed as critical assets. Willis said these developments are creating additional risks in the cyber, physical, energy and regulatory areas, encouraging businesses to adopt a more coordinated approach to risk management.
The report found that conditions remain favorable for buyers across multiple insurance categories, particularly for organizations with strong claims performance. However, Willis said factors such as tariffs, climate-related events, third-party litigation funding, reliance on artificial intelligence technology and geopolitical instability are making the risk environment more challenging.
Willis reports that pricing in the property insurance market continues to soften despite increased climate volatility. The company said greater competition among insurers and improved reinsurance conditions have led to premium reductions of up to 15% for single underwriting plans and up to 25% for strata and shared placements.
At the same time, Willis warned, “secondary hazards” such as floods, wildfires and severe storms are becoming more frequent and causing greater economic impacts, increasing risk in areas not previously considered high risk.
The company also views tariffs as a new issue in the trade credit insurance market. Willis said the market remains competitive despite high levels of insolvencies and claims activity, but tariffs are adding to inflationary pressures and reducing corporate margins, which could put additional pressure on credit quality as companies deal with rising costs and supply chain adjustments.
In addition, Willis highlighted the continued growth in health care-related litigation costs. The average size of the top 50 medical malpractice verdicts will increase by 75% from $32 million in 2022 to $56 million in 2024, according to the report. Willis also noted that investor-backed litigation claims were associated with a 60.5% increase in expenses.
