The global risk landscape is changing rapidly – and not gradually or predictably but in sharp, destabilizing jolts in new directions. Political tensions are inflaming conflict zones, reshaping trade routes, and upending regulatory regimes. From Ukraine to the Red Sea, from sanctions on hostile states to the constant threat of industrial espionage, the rules of the world are being rewritten, much less by markets than by geopolitics.
Traditional insurance is struggling to keep up with this for the simple reason that it is designed to protect against events with historical precedent, such as wildfires and floods; it is not built to insure the fallout from human decision-making. Geopolitical risk is difficult to insure. Yet in the era of polycrisis, this is exactly where some of the gravest risks lie.
The new frontier: risks without precedent
The polycrisis, which refers to the combination of overlapping and interlocking risks, none of which can be treated in isolation, has created two distinct classes of threat. The first, which includes natural catastrophes, can still be addressed through conventional underwriting, though the severity and gravity of these crises is forcing insurers to move to a preventative insurance model, as I have argued elsewhere. The second class of threat is far murkier: the rising tide of cybercrime – which can be insured against – and, most relevant to this article, geopolitical risk, which can't. These threats are rooted in decisions made by people. They are not "acts of God" but acts of governments, factions, or individuals. Their consequences are no less severe, however. The problem is that because they are harder to model, they have traditionally been deemed uninsurable.
Insuring a company against these risks is still impossible; but we can give clients the means to mitigate their risk of disruption or worse from geopolitical shocks. That's why any comprehensive risk management approach must now include geopolitical-focused intelligence. By intelligence, I mean deep knowledge and analysis of the geopolitical landscape and how it is shifting that enables organizations to adapt ahead of time to avoid the worst.
Intelligence-led prevention
The insurance industry must move, and is moving, toward a Predict & Prevent model. In the context of geopolitics, this entails using what we call "enriched external intelligence" – real-time analyses of geopolitical developments, hostile state activity, regulatory change, and economic instability. This gives clients the clarity they need to make informed decisions. A new round of sanctions, a change in leadership, or an outbreak of unrest could trigger factory closures, border delays, or resource blockages; but with the right intelligence, businesses can assess their exposure and act early: by rerouting shipments, relocating personnel, or even withdrawing from volatile markets, for instance.
Companies must also consider insider threats. Hostile actors, including some state-backed groups, are increasingly targeting companies not just through cyberattacks but also by embedding operatives within their organizations. State-sponsored corporate espionage is increasingly common, which is why any geopolitical intelligence provision must include the vetting of hires and third-party firms, along with their continuing monitoring. This helps businesses to root out those human vulnerabilities before it's too late.
Geopolitical risks require corporate action
What I've described entails a change in approach from the world's insurers. But defending against geopolitical risks also asks of businesses that they think differently about the risks to which they are exposed. Intertwined unrest, sabotage, espionage – these could, in theory, be mitigated, but if and only if businesses are willing to arm themselves with the very best, most timely intelligence, and transform from passive recipients of cover to risk partners.
This has been the case for some time in the world's most volatile environments – in Iran, Russia or Ukraine, for instance. Political risk here isn't just a background concern. It's a key daily consideration. Understanding it is vital for doing business in or near these regions. Businesses need to factor in hostile-state tactics, from industrial espionage to cybercrime, and adopt a posture of strategic vigilance. The difference between fragility and resilience depends on having the right information at hand and the means to use it.
The path forward
Modern businesses don't need more paperwork. They need timely insight and foresight grounded on deep experience and expertise. They want answers to questions like: Where might conflict erupt, and what options do I have? Is this regime likely to collapse, and with what impact? Could someone in my professional network, perhaps a third party, be linked to a sanctioned entity, and how will it affect me? These are, unfortunately, not hypothetical risks. They're live concerns, and they demand live, high-quality intelligence and options to act on them. Increasingly, clients are turning to insurers not only for capital protection but for clarity and other integrated services to understand and manage their interlinked risks.
The wider point here is that insurers must move past quantitative data, which, crunched in the right way, issues in those neat and tidy numerical analyses that promise peace of mind. Today, we need to help our clients model the unmodelable and negotiate waters when no one can be certain what lies ahead. Our job is to support clients to navigate uncharted waters and weather the storms. The best intelligence is key to understanding and managing today's volatile geopolitical environment. It lets clients act early, act wisely, and go about their business with full knowledge of what lies ahead and with options to manage it. The larger insurers could also work hand-in-hand with governments and government-adjacent agencies, such as think tanks and resilience academies, to strengthen the resilience and preparedness to geopolitical threats not just of their clients, but of the country on the whole.
