The global credit and political risk (CPRI) reinsurance market has reported strong returns in the first half of 2025, but industry leaders warn that shifting capital allocations could threaten the sector’s capacity in the months ahead.
Phil Bonner, Managing Director, Global Specialty Treaty at Howden Re, commented on the market’s track record: “The market’s resilience has been proven historically,” he said. “But it’s meaningless if the capital it depends upon starts looking for opportunities elsewhere.”
Historically, CPRI has managed to withstand major shocks such as the 2008 financial crisis and COVID-19. The sector is known for its gradual loss development compared to lines like natural catastrophe or aviation insurance, where losses tend to occur suddenly. This slower pace allows underwriters more time to manage exposures and recoveries. However, this stability can sometimes obscure vulnerabilities related to available capacity.
Bonner added: “Capital providers need comfort that, despite slower loss development, underwriters are closely watching exposures and actively managing the risks continuously. The outlook for the remainder of 2025 suggests more needs to be done to convince capacity, where increased risk is already emerging, that the long-term profitability is secure.”
Despite a significant 33% increase in demand for political risk insurance during the first half of 2025, capital deployment remains cautious. While there is still capacity in the market, some insurers have hesitated to expand into new asset classes or emerging markets due to uncertainty about returns.
Olivia Tolaini, Associate Director, Credit and Financial Risks at Howden Re, pointed out that recent improvements in underwriting practices and claims management have helped strengthen the sector. "Gross loss figures may look negative, but active claims management and improved recovery strategies are delivering better outcomes than headline numbers suggest. The challenge now is ensuring that capital owners see beyond these gross figures and recognise the sector's strong fundamentals.”
The gradual nature of CPRI losses has traditionally supported profitability even during difficult economic periods. However, this measured approach does not shield the sector from shifts in capital allocation.
Bonner noted: "The real disruptor isn’t a sudden US$200 million single market loss,” he said. “It’s when capital is diverted to sectors experiencing higher claims after significant events—like the wind blowing or a high profile cyber attack—riding a wave of rate adjustment regardless of how well CPRI is performing through the cycle.”
This pattern has precedent; following the 2008 financial crisis, Swiss Re temporarily exited credit reinsurance due to broader financial exposure—a move that disrupted the market and highlighted how strategic decisions by major players can pose greater threats than direct losses.
Looking forward, industry observers believe that how well CPRI communicates its value proposition will be critical for attracting and retaining capital as client demand grows. Continued innovation in products and strong relationships with investors will be necessary for future growth.
Phil Bonner concluded: “The second half of 2025 will determine whether market perceptions of CPRI can move from its being seen as a dependable performer to being valued as a strategic priority.”