Pandemic fuels heightened political risk in 2021, finds Marsh’s map

Pandemic-induced economic stress will continue to exacerbate political risk throughout this year, according to Marsh Specialty’s Political Risk Map 2021, which shows larger increases in in-country economic risk than ever before across all global regions.

The map is based on data from Marsh Specialty’s World Risk Review platform, and rates 197 countries and territories across nine indicators relating to security, trading and investments.

The Political Risk Map 2021 finds that Covid-19 is fuelling social inequality and political unrest, amplifying threats facing already-fragile economies. It also warns of mass bankruptcies once government-backed trade credit schemes to support business during the pandemic come to an end.

The risk map’s accompanying report says that Covid-19 has widened the divide between rich and poor, setting some countries back decades in their efforts to reduce poverty. Food security, water access and energy costs remain acute pressures that can lead to growing nationalism and civil unrest, it warns. Societal inequality, meanwhile, will factor in electoral platforms, especially in middle- and low-income countries, according to Marsh Specialty.

Many governments have implemented fiscal and monetary policies to fuel a recovery from Covid-19. But Marsh Specialty’s Political Risk Map 2021 shows larger increases than ever before in country economic risk across all regions. This is driven by increases in deficit spending, adding to sovereign and commercial credit risks in less-developed economies.

Marsh’s analysis projects a growing disparity between emerging economies and industrialised nations. “Strains on public financing in emerging markets will result from increases in sovereign indebtedness and may create unfavourable conditions for domestic and foreign-owned businesses,” the report warns.

The broker says that its findings mirror those of the World Economic Forum’s (WEF) Global Risks Report 2021. It also found that the Covid-19 pandemic is increasing disparities between emerging economies and industrialised nations. The WEF’s report says this will drive social fragmentation and weaken geopolitical stability during the next five to ten years.

According to Marsh Specialty’s Political Risk Map 2021, social inequality is a “pervasive risk” across multiple regions – particularly in Europe and the Americas.

“In the future, inequality is likely to influence elections, contribute to political and economic nationalism, and could create conditions that spark open conflict,” it says.

And it notes that many countries created or changed state-backed trade credit schemes to provide economic stability during the pandemic. Marsh fears this may have propped up “zombie” companies and a raft of bankruptcies could occur once these schemes end.

“While these programmes are currently supporting domestic trade and exports, critics argue they are keeping zombie companies – those with heavy debt burdens and low cash reserves – alive. The Political Risk Map 2021 points to the risk of mass bankruptcies among zombie companies once these government-backed schemes expire,” it says.

Stephen Kay, global head of political risks at Marsh Specialty, commented: “As the world recovers from the effects of Covid-19, we expect the issues of social inequality, country economic risk and strategic resource nationalism to take centre stage in influencing political decision-making.”

But he said that despite “many areas of heightened risk”, opportunities remain for corporate entities, financiers and investors.

Mr Kay added that insurance-backed political risk and credit solutions can help to secure trade and investment capital, unlock liquidity and enable growth that will fuel and sustain the recovery from Covid-19.

Marsh’s Specialty’s interactive map can be used to help multinationals make better-informed decisions about how to deploy their financial resources and manage the risks associated with their operations, assets, investments and contracts in the year ahead. It can be found at

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