Political risk is the risk that is most universally concerning among risk managers dealing in international commercial situations, yet it remains largely uninsured, according to an international risk survey released by Chubb at last week's RIMS conference in Atlanta. The survey was conducted among risk managers.

However this does not have marketing implications for Bermuda's political risk insurers, such as Sovereign Risk Insurance. Price Lowenstein of Sovereign said he was not surprised at the survey results as "risk managers don't buy a lot of political risk insurance. Only one out of our 170 political risk policies is placed with a risk manager.

"Typically it was risk managers of the big multinational companies that used to buy political risk, but it is a different market now. Banks buy it to insure their investments and most of our policies are with banks.'' The Chubb survey said that 81 percent of risk managers expressed moderate to high concern about political risk exposures, but only 13 percent actually have coverage in place. Those expressing a high level of concern about these risks are more concerned in general about international exposures and are in close communication with their companies' chief decision makers.

The levels of concern about political risk reported showed only 17 percent highly concerned about currency risk, 30 percent about economic/political instability and 32 percent about kidnapping or extortion threats.

There were a variety of reasons given by risk managers for their companies not having this type of cover. Fifty one percent said it was a risk their companies choose not to transfer, ten percent said there was no product available, eight percent said there is a better risk transfer solution, eight percent said the company was not concerned, eight percent said they were not responsible for mitigating and 15 percent said they didn't know.

The report said that there is relatively less concern over protecting cyberassets and miscellaneous intangible assets, such as brand, patent and intellectual property. But risks to these asset classes are expected to grow most significantly over the next few years, both domestically and internationally.

Risk to cyberassets is expected to become more significant over the next few years, followed closely by miscellaneous intangible assets. Also expected to become more significant are risks to financial assets, human resources and physical assets.

The survey also reports that traditional risk exposures cause risk managers greater concern than those that historically have been outside the scope of risk management. Of 22 different risks and risk exposures highest concern is shown for traditional risks, even though risks in the lower concern categories could impact an international company quite substantially.

Of highest concern is general/legal liability, property damage, professional liability and workers compensation. Only moderate concern was shown for employment practices, cyber attacks, environnmental liability, workplace violence, kidnapping, economic/political instability, product liability, fiduciary liabilty, employee theft, weather related risks, regulatory risk, supplier risk and product development risk. Of lowest concern is currency risk, credit risk, cargo theft, interest rate risk and strike/work stoppage.

Chubb: Political risk a top concern The Chubb survey said the full benefits of a centralised international insurance programme might be going unrealised by the vast majority of multinationals. This they attribute to a lack of communication with foreign locations.

The vast majority of risk managers report that purchase of insurance for their international operations is mostly or entirely centralised. Only 28.6 percent report a high level of contact with people in the company's foreign locations when designing and managing the company's international property and casualty insurance programme.

The report also found that while international operations contribute significantly to multinational companies' revenues, domestic risk still overwhelmingly commands the greatest share of risk professionals' concern.

The report concludes, "Without a clear understanding of the relative significance of different types of risks and exposures around the world, risk managers will not be able to properly allocate their resources. With a growing percentage of assets at stake internationally it is imperative that risk managers develop this clear understanding and broader view of managing risk across the globe.''