Looking to the future

An unstable world

Transactional risk placement volumes are rising in 2025, but geopolitical uncertainty will continue to challenge deal teams in building consistent risk strategies. How for example, does one manage investment decision risk in a world where government policy is increasingly formulated not through the ordinary deliberate pre-emptive process but instead that of impulse and through employing post-hoc amendments to practice in order to facilitate impromptu change. For their part, underwriters are likely to respond to such a world by adopting an approach which seeks to calibrate appetite against the status quo during a given underwriting period and so it is not impossible that we see fluctuations in risk appetite as insurers seek to keep pace with the landscape of an unstable world. Driven by these and internal concerns such as exposure levels, the penchant for acceptance or decline of categories of risk, be they sector or jurisdiction, may become less easy to predict.

All indications are that in spite of this, US deal teams remain optimistic and continued capital depth should enable them to develop and execute plans with a sense of purpose. Notably however the rhetoric emanating from segments of the US government is geared overtly to discouraging foreign investment and as rhetoric and policy reality begin to align, there is potential for US outbound direct investments to be constrained. Moreover, the uncertainty of tariff and non-tariff barriers – will they/won’t they – makes it such that only the more bold deal teams may be willing to initiate transactions when the future remains unclear. For buyers with sufficient scale, strategies in this context may be influenced by a desire to protect service and product integrity, as well as international market share. This could lead to acquisitions or bolt-on deals in territories that, in more orthodox times, might not have warranted such consideration. Such shifts may also come to impact transactional risk management policy forms. For example, should the trend of US buyers seeking coverage for UK and continental European acquisitions subside, a reduction in demand for "US style" enhancements that have traditionally been a key client requirement for US buyers may follow. Since this approach to enhancements has increasingly been a feature of non-US transactions, a reduction of US buy-side involvement in European markets is likely to have second order effects across the European transactional risk insurance landscape.