Risk- not just a board game (Australasia...is, fyi, the key to success)

Ciao Ragazzi,
Another week in the financial world that has made me think of some interesting things. But essentially I’m going to skip over all those interesting things and go straight to something I read this morning on one of my favorite political blogs.

Political risk in foreign markets. This is something that I’m sure we’ve all studied, and definitely something that we have to think about from the Insurance side of the world. I also happen to find this fascinating. The article in sweetness & light spoke of how foreign investors are pulling out of Russian markets due to an instable political situation which caused a precipitous fall in trading. This goes back to some of my recent posts about the fantastic mingling between finance and government. Who controls assets- and what does that mean to private entities?

This is something that we think of often (or at least we should) as Insurers- especially to be honest, since I’ve been working in Europe. Why you may ask? Lets think of a basic Commercial General Liability (RCT as abbreviated in Italy) policy for an international law firm. Lets say, this firm has 3 offices, one in New York, one in Milan (otherwise I probably wouldn’t care to look at it being a snob about these things) and one in the middle of Kenya (you know, like most big international law firms have that oh so important Kenyan office). As an Underwriter, one must take into account the political enviroment in NY, Milan and Kenya and the possible ramifications on the property if, as happens so very often in New York, tribal wars break out. Seized or destroyed property becomes an Insurance claim.

While underwriting Professional liability, lets say, for our imaginary international law firm, the socio-political enviroment is something that should weigh fairly heavily on rating applied to said prospective Insured. For example, Americans (and particularly certain jurisdictions within America) are far more litigious than Italians here, which is why we can underwrite policies at premiums that are shockingly low compared to the premiums that would be generated in the New York marketplace.

Just some food for thought, which I find interesting (I TOLD you all that if you didn’t ask questions that I was going to ramble on about Insurance…I don’t lie about serious things like this).