Risk. It used to be something you modelled. You had probabilities, precedents, and patterns. Insurers looked to history to underwrite the future. A wildfire, a flood, a theft – datasets pertaining to these and other events were analysed and the likelihood of their recurrence priced. But today, that approach is no longer enough.
Why? Because the global risk landscape is shifting, and in sudden, unpredictable lurches. Political tensions are rising or have spilled out into open conflict; sanctions are being imposed or lifted overnight; and once-stable global trading routes are collapsing. The rules of the world, once taken for granted, are being radically reshaped not just by markets, but by real ideological changes and international realignments. This demands a new approach to risk, both from insurers and the businesses they protect.
One cannot insure against all the decisions of state actors, even if one can for some elements, such as government appropriation of assets. Geopolitical volatility is now a major threat to the continuity of businesses, particularly those operating internationally. We are entering an era of intelligence-led insurance.
The problem with people
Geopolitical decisions are human decisions. These risks are rooted in the choices people make, some of which will be rational and some not. This is what makes them extraordinarily difficult to predict, let alone model.
A new round of sanctions, a surprise election result, a naval blockade, an outbreak of unrest – these can close a factory, block a border, or cause the overnight crash of a market. And they're not rare or extreme possibilities anymore, as we've all seen. They're part of the weekly new cycle. Insurers, if they're to fulfil their function and ensure societal resilience, have been forced to respond.
From protection to prevention
That response demands evolving. As in other risk areas, insurers need to move from providing compensation after a setback to helping to prevent one happening in the first place. And that is where geopolitical intelligence comes in. By working with geopolitical risk capabilities, insurers can introduce real-time geopolitical analyses into their clients' risk management toolkit. This might involve tracking hostile state activity, regulatory changes, cyber threats, and even insider risks like state-backed espionage. It isn't about predicting the future with certainty. It is about recognising the signs, understanding the patterns, and being given the knowledge to act early.
A business that knows that a region is likely to witness unrest in the coming months can begin to reroute shipments, relocate staff, or hedge exposure. A company that sees early signs of sanctions being imposed on a partner firm can quickly untangle itself. And one that monitors its suppliers, contractors and personnel for links to hostile actors can avoid being blindsided by reputational or financial fallout.
Clients as co-pilots
None of this works unless clients are ready to think differently, too. To be truly protected, businesses must become proactive risk managers. That means working hand-in-hand with their insurer to develop greater vigilance and ensure the resilience of their operations. That in turn means getting to grips with how geopolitical factors could affect their supply chains, their staff, their partners, and their markets. Difficult questions must be asked: Could someone in my network, perhaps even in my company, be connected to a sanctioned entity? The difference between fragility and resilience in respect of geopolitical risk often comes down to information: who has the highest-quality, most up-to-date knowledge of the situation- to inform their judgement.
Insurers as navigators
Increasingly, as insurers, our job is to help clients model the previously unmodellable. Technology can help us to do things we could not do in the past. We can predict wildfires and floods with a degree of accuracy unthinkable just a few years ago, and we can even help to prevent disaster.
But some risks remain uninsurable, and the task of insurers is to help clients navigate through this ambiguity. We have to give them information and direction: the means to act intelligently and inform their judgement. This is about providing clarity: clarity about what is happening in the world, what it means for them, and what they can do about it.
So, at least with respect to geopolitics, our role is becoming that of a navigator. Our clients remain captains of their ships; but in this turbulent sea, they need someone to help them understand the currents, weather, and chart a course to calmer waters. The winds of geopolitics are blowing harder than ever. We can neither ignore them nor control them. But we can help our clients to sail with them.
