Political Risk, Political Violence, and Trade Credit Insurance: The Specialist Lines the GCC Cannot Afford to Overlook

Over the course of a career spent at the intersection of reinsurance, development finance, and conventional and Islamic risk transfer, I have returned repeatedly to a conclusion that the events of recent years have only reinforced: the three specialty insurance lines of political risk, political violence, and trade credit are among the most consequential and least understood components of the global risk transfer system. They are the lines that matter most precisely when the world becomes most difficult, and they are the lines that the GCC and the broader MENA region have historically been most dependent on sourcing from markets far from home.

This article is an attempt to explain what these lines are, why they are structurally interconnected, why reinsurance sits at their foundation, and why ADGM is positioned to play a more significant role in their development than it currently does.

Three Lines, One Ecosystem

Political risk insurance, political violence insurance, and trade credit insurance are often discussed separately. In practice they operate as an ecosystem. They share underlying risk drivers, including sovereign instability, geopolitical stress, and the unpredictable conduct of states and non-state actors, and they are frequently combined in structured transactions involving project finance, export credit, and cross border investment. Understanding each line individually is the starting point, but it is their interaction that defines their practical significance.

Political Risk Insurance: Protecting Investment and Finance

Political risk insurance protects investors, lenders, and exporters against losses arising from the conduct of governments or political entities rather than from commercial failure. The four core perils are expropriation (the seizure, nationalization, or confiscation of assets), political violence in its broader forms, currency inconvertibility and transfer restriction, and the frustration of contracts by a government counterparty.

The market for political risk insurance has grown substantially over the past two decades, driven by the globalization of investment flows, the expansion of infrastructure finance in emerging markets, and the increasing willingness of sovereigns to participate in large commercial and industrial projects as counterparties.

The private credit and political risk insurance market holds estimated total exposures of approximately USD 495 billion as of early 2025, a figure that reflects both the scale of the underlying demand and the capacity that the London market, Lloyd’s, and a growing number of specialist insurers have developed to meet it.

For GCC investors, developers, and financial institutions with assets and exposures across MENA, Africa, and Asia, political risk insurance is not a peripheral product. It is a core enabling mechanism for cross border investment and for the structuring of project finance transactions in environments where sovereign conduct is a material variable.

Political Violence: A Distinct and Growing Line

Political violence insurance is frequently grouped with political risk but operates differently and deserves separate treatment. It covers direct physical loss or damage arising from acts of political violence: war, terrorism, civil commotion, insurrection, revolution, coup d’état, and sabotage.

Unlike conventional property insurance, political violence coverage is specifically designed to respond where the cause of loss is deliberate, politically motivated human action rather than accident or natural hazard.

The global market for political violence insurance has evolved significantly in response to an increasingly complex threat environment. Coverage has moved beyond the traditional terrorism product toward integrated policies that address the full spectrum of political violence perils including active assailant, malicious damage, and supply chain disruption arising from civil unrest. The interaction between political violence cover and war risk exclusions in standard property policies is an area of particular complexity that practitioners in this region need to understand with precision.

For insurers and reinsurers operating in or connected to the MENA region, the political violence line carries specific significance. The region has a higher baseline exposure to political violence risks than many other markets, and the concentration of high value insurable assets, including energy infrastructure, petrochemical facilities, desalination plants, ports, and airports in geographically proximate and potentially exposed locations makes the pricing and structuring of this coverage a technically demanding and commercially important discipline.

Trade Credit Insurance: The Engine of Cross Border Commerce

Trade credit insurance protects exporters, banks, and financial institutions against the risk that a buyer or borrower fails to pay for goods, services, or financing extended across borders. The failure to pay may arise from commercial causes such as insolvency and protracted default, or from political causes including transfer restriction, import prohibitions, licence cancellation, or the intervention of a government that prevents a buyer from meeting its obligations.

The distinction between commercial and political causes of non-payment is fundamental to how trade credit policies are structured and how claims are settled.

In emerging market contexts, where the boundary between sovereign and commercial risk is often blurred, this distinction requires careful underwriting and a sophisticated understanding of the operating environment.

Berne Union members, the international body representing government backed export credit agencies, multilateral institutions, and private market insurers in this space, supported USD 140 billion of long term capital flows into developing countries in 2024 alone, much of it enabled directly by export credit and trade credit insurance that made transactions viable for banks and investors who could not otherwise have absorbed the underlying risk. Trade credit insurance is not a niche product. It is a fundamental infrastructure of international commerce, operating largely out of sight until it is needed.

The Reinsurance Backbone

None of these three lines functions at scale without reinsurance. Political risk, political violence, and trade credit are specialty lines with low frequency but potentially very high severity. A single political event such as an expropriation, a civil conflict, or a trade embargo can trigger losses across multiple policies and multiple cedants simultaneously.

Reinsurers provide the capital depth and the risk diversification that allow primary markets to write these lines at meaningful limits without concentrating unmanageable exposure on a single balance sheet.

The reinsurance market for political risk and trade credit is dominated by the London market, including Lloyd’s and the company market, alongside a relatively small number of specialist continental European reinsurers. This concentration has historically worked well in stable conditions. It has proven more fragile under stress: when correlated losses threaten multiple cedants simultaneously, and when the reinsurance market reassesses its appetite for politically exposed risks, capacity constraints can emerge quickly and with limited warning.

The same structural vulnerability, namely the concentration of specialist capacity in a small number of markets with limited regional alternatives, that applies in marine war risk and energy lines applies equally in political risk and political violence reinsurance. It is a point the GCC reinsurance community needs to take seriously as the region looks to build more resilient and regionally grounded risk transfer capacity.

Political Risk Insurance in the GCC: Why the GCC and MENA Region Demands Attention

The GCC occupies a distinctive position in the global political risk and trade credit landscape. As a set of sovereign investors, traders, and development finance providers with significant assets and interests across MENA, Africa, and Asia, GCC entities are major buyers of political risk coverage. At the same time, as a region that generates substantial cross border trade and investment flows, including through development finance institutions and sovereign wealth funds, the GCC is also a significant source of the transactions that trade credit insurance enables.

The demand for these specialty lines from GCC based institutions is real, growing, and structurally well founded. What has been slower to develop is regionally grounded underwriting capacity and institutional expertise in these lines. The result is a persistent dependency on London and other distant markets for products that are directly relevant to the GCC’s own investment and trade activity. Building that capacity closer to home, within ADGM and in alignment with the FSRA’s developing framework, is both a commercial opportunity and a strategic priority.

The Multilateral Dimension

Political risk and trade credit insurance do not operate in a purely private market context. Government backed export credit agencies, multilateral development banks, and specialist multilateral insurers play a significant and complementary role alongside private market capacity. The Berne Union, the International Union of Credit and Investment Insurers, whose 86 members collectively represent the vast majority of the world’s export credit and political risk insurance activity, provides the global framework within which public and private sector providers operate together.

In 2026, global export credit and political risk insurance demand is expected to strengthen, driven by trade agreement activity and energy project finance. This outlook reflects the structural importance of these lines: they expand when trade expands, they contract when risk appetite contracts, and they are always most visibly needed when geopolitical conditions deteriorate.

Understanding the interaction between public and private capacity in these lines, and the role of multilateral institutions in bridging gaps that private markets alone cannot fill, is essential for any practitioner seeking to operate in this space.

For the GCC, which hosts or participates in several multilateral institutions with mandates in trade finance, investment insurance, and development finance, this multilateral dimension is not abstract. It is directly relevant to how the region structures its cross border financial activity and how it manages the political and commercial risks that accompany it.

ADGM’s Opportunity

ADGM has the regulatory framework, the legal infrastructure, and the geographic positioning to become a meaningful platform for political risk, political violence, and trade credit reinsurance. The FSRA’s common law foundation, its alignment with IAIS Core Principles, and its active regulatory development programme provide the institutional environment that specialist underwriters require. The proximity to the MENA and African markets that generate these risks, combined with access to Gulf sovereign and institutional capital, creates a natural commercial rationale.

What has been missing is the organised practitioner community and the institutional voice that can advocate for the development of these lines within the ADGM market. The specialist lines covered in this article, namely political risk, political violence, and trade credit, are not peripheral to ARIA’s mandate as the dedicated reinsurance association of ADGM. They are central to it. ARIA intends to develop its engagement with the practitioners, underwriters, brokers, and institutional investors active in these lines, and to contribute to building the depth of expertise and capacity that these markets require.

Practitioners and institutions active in or connected to political risk, political violence, and trade credit reinsurance are invited to engage with ARIA at aria-adgm.org or at info@aria-adgm.org.

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