Is 2024 a major turning point for risk?

Is the current year a major turning point for risk? If trends such as important elections, economic uncertainty, and an uptick in violent conflicts are to be believed, then we may be at the cusp of unprecedented instability.

In its 2024 geopolitical risk report titled “2024: a turning point?”, global insurer Howden outlines a complex and volatile risk landscape that spans macroeconomic, geopolitical, and technological realms, noting that economic uncertainties and a rise in armed conflicts are set to coincide with a significant number of high-profile elections in 2024.

The upcoming year has been dubbed the “biggest election year in history”, with around 60 countries — representing about 40% of the global population and gross domestic product — scheduled to conduct elections. This electoral calendar introduces substantial uncertainty for businesses and the re/insurance sector alike.

Howden highlights the potential for increased political instability, exacerbated by widespread grievances over the rising cost-of-living, food and energy insecurity, declining real incomes, and high debt levels. These issues may lead to more frequent outbreaks of violence, fuelled further by growing populism, polarization, and the risk of misinformation undermining democratic processes.

According to Howden’s analysis, insured losses attributable to civil unrest have significantly escalated over the past decade, reaching a total of US$7 billion between 2020 and 2023. This trend suggests that recent instances of civil unrest reflect broader challenges within the macro-environment, amplified by technological advancements and the widespread use of smartphones and social media.

Sandy Warne, head of terrorism and political violence at Howden Tiger, commented on the implications of the upcoming elections and the “added layer of unpredictability” that it brings to the table.

“Businesses must prepare for and safeguard against the increasing risks related to political events, highlighting the importance of political violence and political risk insurance,” Warne said.

Warne noted the potential for sudden changes in exposure for companies due to shifts in governance, including policy changes, contract cancellations, and debt defaults. These changes pose direct financial risks, including property damage and business interruption, while also threatening operations, personnel, supply chains, and reputations.

Persistent threats to global stability

Beyond election-related uncertainties, the report points to ongoing geopolitical tensions and conflicts as persistent threats to global stability. Issues such as conflicts in the Middle East and Ukraine, tensions across the Taiwan Strait, and geopolitical fragmentation following Russia’s invasion of Ukraine are redrawing global trade maps and affecting supply chains, energy security, and international trade.

The report also touches on disruptions to shipping in the Red Sea and recent increases in pirate activity, noting the marine war insurance market’s role in supporting vessels in volatile regions and how freight rates have adjusted in response to heightened risks.

“2024 is poised to be a pivotal year, with ongoing macroeconomic uncertainty, heightened geopolitical risks, and a unique election cycle reflecting the challenging environment businesses have faced since the decade began. This situation underscores the vital role of risk transfer in maintaining global commerce amid disruptions,” Howden head of research Julian Alovisi said.

Alovisi also highlighted that, after five years of market hardening, the insurance landscape in 2024 is expected to become more favorable for buyers, with increased competition leading to greater capacity and more stable pricing.

In this era of macroeconomic and geopolitical instability, the insurance sector plays a crucial role in underpinning economic resilience and fostering new growth opportunities by adapting to clients’ evolving needs, he said.

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