Global insurance markets are undergoing a significant reshaping as geopolitical tensions intensify and the rapid build-out of digital infrastructure introduces new layers of risk across economies, according to a new report by Willis (WTW).
In its latest Insurance Marketplace Realities report, the firm argues that risk is no longer contained within specific industries or regions. Instead, it is increasingly systemic, cutting across supply chains, financial systems, energy networks and digital ecosystems in ways that are forcing insurers and businesses to rethink how exposure is assessed and priced.
A key driver of this shift is rising geopolitical instability, particularly in the Middle East, where renewed tensions are already feeding into global insurance pricing. The report shows that political risk insurance rates in Gulf countries are projected to rise by 20 to 30 percent, reflecting heightened uncertainty in the region.
However, not all segments are moving in the same direction. Pricing for traditional political risk cover and trade disruption insurance is expected to remain largely stable, with increases capped at around 5 percent. The divergence, the report explains, reflects a broader recalibration in how insurers now distinguish between localized shocks and systemic global disruptions.
Across the industry, political risk is increasingly being treated as a national security issue rather than a niche underwriting concern. Businesses, in turn, are embedding political risk insurance more deeply into enterprise-wide risk strategies as global events continue to disrupt capital flows, regulatory environments and operational continuity.
Beyond geopolitics, the report highlights technology as a second major force redefining the global risk landscape. The accelerating demand for artificial intelligence, cloud computing and data-driven services is driving massive investment in digital infrastructure, particularly data centres and interconnected cloud ecosystems.
While this expansion is central to modern economic growth, it is also creating complex new exposures. These assets now sit at the intersection of physical infrastructure risk, cyber threats, energy dependency and evolving regulatory oversight, pushing insurers toward more integrated and multi-dimensional risk models.
Despite this increasingly complex environment, parts of the insurance market remain relatively favourable for buyers. The report notes that competitive pricing continues for risks with strong loss histories. However, this stability is being tested by a growing list of pressures, including tariff uncertainty, climate volatility, third-party litigation funding, AI dependency and geopolitical fragmentation.
In the property insurance segment, conditions continue to soften even as climate-related losses rise. Strong competition among insurers and improved reinsurance capacity have led to rate reductions of up to 15 percent for single-carrier programmes and as much as 25 percent for shared and layered placements.
However, the report warns that climate risk is becoming more dispersed and less predictable. Events such as wildfires, flooding and severe storms, often described as “secondary perils”, are increasing in frequency and cost, expanding exposure well beyond traditional high-risk zones and complicating underwriting decisions.
Trade credit insurance is also facing new pressure points. Although the market remains competitive despite rising insolvencies and claims activity, tariffs are emerging as a significant concern. They are contributing to inflationary pressure, tightening corporate margins and potentially weakening credit quality as businesses adjust to higher input costs and disrupted supply chains.
Healthcare and litigation trends are adding further strain. The report highlights a sharp rise in legal costs, particularly in medical malpractice cases, where the average value of the top 50 verdicts increased from $32 million in 2022 to $56 million in 2024, a 75 percent jump. Investor-backed litigation is also driving higher payouts, increasing settlement values by more than 60 percent.
According to Jackie Bolig, head of Placement and Broking Solutions for Corporate Risk & Broking, North America, geopolitical instability has now moved from the periphery of risk discussions to the centre of global insurance dynamics.
“Geopolitical uncertainty is no longer a background risk. It’s a primary driver of volatility across the insurance market. From supply chain disruption to energy security and regulatory divergence, global events are translating into real and immediate impacts on cost and risk. Organisations need strategies that reflect a world where disruption is faster, more interconnected and harder to predict,” Bolig said.
