Unrest in Turkey and Brazil has minimal impact on political and trade credit markets

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Thursday,  4 July 2013

Unrest in Turkey and Brazil has minimal impact on political and trade credit markets

By Ben Norris Email Author

Recent unrest in Turkey and Brazil has had minimal impact on the global political risk and trade credit insurance markets, according to Marsh.

Recent unrest in Turkey

The broker notes that up until 21 June, leading insurers it surveyed reported no business losses in either country that would likely trigger political risk insurance claims.

Political risk insurers are however closely monitoring developments and ‘will likely become more selective of the risks they take’, said Marsh.

Trade credit insurers are also monitoring the situation and say market conditions could rapidly change if violence escalates in either country.

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Large political demonstrations continued in major cities in Turkey and Brazil throughout June. “The situation in both countries is fluid, and it remains to be seen whether the unrest has peaked or will continue in the coming days and weeks,” said Marsh.

If the unrest in Brazil or Turkey does ultimately result in physical damage to insured assets, losses typically would not be covered by traditional property and terrorism insurance policies, added the broker.

The events serve as a wake up call to risk managers of threats in countries that have been historically stable.

Multinational organisations should not attempt to identify specific countries in which they will face the greatest political and trade credit risks, or the specific nature of those risks, advised Marsh.

Rather a more holistic approach should being considered by an increasing number of multinationals whereby broad, multi-country insurance policies, rather than separate political risk and trade credit insurance policies that cover particular risks in specific countries, are placed.

Aside from buying insurance, organisations can take other measures to protect their companies and employees against political unrest.

According to Marsh these include:

  • Monitoring local government travel advice, providing regular updates and guidance to staff and clear instructions about not travelling to work when it is unsafe to do so
  • Maintaining open communication channels with staff in affected countries to gain advice or provide information about changes to their situation
  • Advising staff to monitor local news broadcasts via television, radio, and internet
  • Remaining in contact with airlines concerning flight schedules and status

Businesses should also review crisis management plans-both across the organisation and in affected countries.

Marsh advises:

  • Evaluating the immediate impact of events in an affected country on operations, taking into consideration customers, suppliers, employees, and other key stakeholders
  • Giving early warnings of any potential problems to customers and suppliers
  • Reviewing crisis management and communications plans
  • Reviewing business recovery strategies with specific attention to information technology and communications requirements
  • Taking opportunities to switch some business activities to unaffected areas

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