Credit and political risk insurance: A private market update

The past two years have ushered in changes at a pace that has left even the most seasoned observers struggling to keep up. Amid heightened volatility and the lingering effects of Liberation Day, the credit and political risk insurance market (CPRI) is adapting to a world in flux.

Demand drivers: Regulation, diversity, and innovation

Every time BPL is called upon to craft an annual market report, the previous year’s events stand out as “exceptional”. In this whirlwind, it is vital to return to the core dynamics of supply and demand that shape our market. When it comes to CPRI, banks remain the primary force driving demand. This year, the implementation of Basel 3.1 rules finally brought much-needed clarity to the regulatory position of credit insurance for banks – confirming a mandatory 45% LGD floor for credit-insured exposure, but giving a nod to credit insurance as an official risk mitigant within the Basel framework.

What does this mean? For one, larger, established banks are holding firm in their purchasing strategies, while the regulatory green light has also sparked a fresh wave of interest from newer bank entrants looking to share their risks within the CPRI market. There has also been an increasing shift towards insuring new sectors with lower-rated obligors, where the effects of the 45% LGD floor may be less pronounced.

While banks have long been the steady backbone of the market, we are now seeing a surge in demand from an expanding roster of clients, including Multilateral Development Banks (MDBs), Development Finance Institutions (DFIs), and, of course, Export Credit Agencies (ECAs). These organisations are driving an ever-growing need for coverage, and the market is adapting accordingly.

Focusing on the ECAs, it is clear that while there is still a consistent demand for facultative reinsurance – particularly for those “tall tree” exposures tied to major export contracts – there is an evolving recognition that the CPRI market can serve as a dynamic platform for risk-sharing across a broader range.

This shift became particularly apparent when looking at COVID-related exposures when many ECAs pivoted sharply to support their domestic exporters, rolling out export-support loan schemes to stabilise the market: risks such as these should certainly be viewed as ones that could be shared with private reinsurers.

The CPRI market is witnessing a steady stream of business from a growing pool of clients, all of whom are becoming increasingly innovative in how they use the market to manage their risks. Indeed, innovation is the name of the game now, and this diverse demand is helping to shape the future of the industry.

Supply: Stability and quality

While the demand for CPRI has weathered a variety of challenges, the supply side is booming, both in terms of volume and quality. Following Lloyd’s of London’s upgrade to AA- by S&P in December 2023, we have seen a wave of other insurers such as QBE, AIG, Crum & Forster, and HDI receive the same ratings boost. In fact, in a market of over 70 carriers, there are now over 50 actively operating that benefit from this AA- and above status.

It is not just the big names that are driving change. The market is increasingly populated by new players, many with a distinct focus on niche asset types. We are seeing carriers specialising in everything from renewable project financing to leveraged buyouts. This growth is further supported by a stable, expanding network of reinsurers, who are providing long-term, dependable partnerships to the market.

The changing face of the market

So, what does this evolving market look like? If we were to sketch out a typical risk, it would most likely involve a bank-insured loan to a borderline investment-grade borrower, probably based in Western Europe or the United States. This development represents one of the most significant transformations in the market over the past five years. Historically, the CPRI market had a heavy focus on commodity flows, with significant exposure to oil-rich nations. Today, however, it has evolved into a much more balanced and stable portfolio, while maintaining the traditional emerging market risks. To illustrate this, 2024 was BPL’s biggest year for claims, as we collected over USD 500 million of claims for our clients. This number was remarkable not only for its size, but for the fact that such values of claims are becoming increasingly commonplace.

As of March 2025, BPL’s portfolio stands at an insured amount of around USD 90 billion. If we use our own statistics as a benchmark (given BPL represents an estimated 20% of the brokered market), we estimate that the CPRI market as a whole holds exposures totalling roughly USD 495 billion. It is a market that can stand proudly alongside its public agency cousins in the Berne Union as a supporter of global trade and commerce, and as the complexities of the world continue, the areas for collaboration between the private and the public sides of our industry will only increase.