Climate change could develop a direct and more obvious correlation with political violence. The effects of climate change are well known – drought, famine and mass migration. Each of these may have a significant impact on the already heightened world tensions and predicted increase in political violence. Already unstable governments may struggle with the increasing needs of their populations in response to a heating planet and changing international views on the subject of foreign aid. The political violence and terrorism market will need to be wary in the coming 12 months when it comes to risks located in areas bearing the brunt of climate change.

The market will continue to insure, but keep a close eye on, Ukrainian grain exports. Last year we noted that the closing of the Black Sea corridor for Ukraine's substantial grain exports may have an indirect impact of increased risk of political violence in nations reliant upon the UN World Food Program. During the last 12 months, Ukraine has succeeded in boosting its exports via a combination of hugging the Black Sea coast where Russian submarines cannot operate and via the Danube river. The Black Sea fleet's partial redeployment has also assisted the security situation (and insurance rates). With the war unlikely to cease in the short to medium term, the insurance market will need to monitor the status of Ukrainian port facilities as well as the potential targeting of grain shipments by Russian forces.

AI-generated disinformation campaigns are expected to heighten political unrest and violence globally. Incidents in 2024 serve as examples: fake stories about public officials, UK riots sparked by false social media information, and disinformation targeting French elections. As generative AI becomes more accessible and sophisticated, there is a risk of it being weaponised to push radical narratives and conspiracy theories, such as fabricated coup attempts or amplified extremist content on social media platforms. Increasing public distrust may spark widespread civil unrest, heighten geopolitical tensions, and lead to targeted political violence and terrorism.

As organised crime evolves, insurers need to adapt quickly to address potential legal ambiguities and the growing risk landscape. Certain states within Latin America continue to experience a rise in organised crime, fuelled, in certain instances, by drug trafficking, economic hardship and corruption. Many countries must grapple with cartel-related violence, extortion and kidnappings, further destabilising the region. The political violence insurance sector will, no doubt, have to grapple with the consequences of this rise in organised crime. Insureds often seek cover for organised crime within specialist PV cover; regrettably, these policies often lack precise definition of terms like 'organised crime', which can lead to inconsistent interpretations, in particular by the local courts. Greater attention to even standard wordings at the underwriting stage can avoid unexpected results when it comes to these complicated coverage assessments.

Russia's continued operations in Ukraine, new global alliances, the South China Sea tensions, not to mention the complex and multi-faceted issues in the Middle East, mean the potential for global political developments to impact business operations continues to grow. Political risk insurance has long been at the forefront of assessing developing global trends and offering solutions, be that cover for confiscation, expropriation, nationalisation or deprivation by or under the order of a foreign government (CEND), contract frustration cover or unfair calling of bonds (to name but a few). All of these products become increasingly attractive and important in a progressively unstable global environment. We predict growing demand in 2025.

Shifts in global alliances may increase the need for and exposure of many insurance lines. A recent joint article by the heads of MI6 and the CIA noted that the world order was currently under a scale of threat not seen since the Cold War. While nations differ on the degree to which Russia is excluded from the global economic and trade system, it is not just the war in Ukraine that has heightened global risk. Ongoing events in the Middle East, together with the resurgence of Islamist extremism in the form of Boko Haram and a resurgent Islamic State, mean the risks faced around the world are numerous and multi-faceted. Insurance plays a huge role in managing these risks to enable trade, commerce and safety to continue and we predict the insurance industry will continue to develop innovative means of cover across the spectrum.

As we predicted last year, geopolitical instability and large scale protests across the globe have been a common theme this year, raising several issues for underwriters writing terrorism and political violence cover.  Both peaceful and more violent protests (sometimes at the same time) have been a regular theme in the UK and we expect this to continue throughout 2025. It raises a number of potential issues for insurers including in the UK property market, in particular in relation to when it can be said that a peaceful protest turns into a violent one.  Insurers should give careful consideration to their use of terms such as strikes, riots and civil commotion as well as malicious damage to make sure that they are appropriate in the current climate of political instability, so that cover is being offered that is within insurers' risk appetite.

The global political upheaval is leading to geopolitical risk scenarios that will influence the scope of cover. The risk scenarios are diverse and differ not only according to the dimension of the violence exercised and the possible political objectives associated with it. General exclusions for war, sanctions clauses and territorial exclusions are becoming more relevant, including for business interruption and contingent business interruption. Climate change and natural hazards will also influence the claims picture, with legislative changes on climate-neutral transformation having a significant impact on risk and regulation. Inflation and rising prices are also causing insurance values to increase significantly, requiring adjustment to sums insured (to avoid underinsurance), limits, business interruption periods and premium increases.

COVID-19 and the invasion of Ukraine have disrupted the global energy market and in turn caused several countries to invest in their own oil and gas industries. This threatens walking back on policies to support and grow renewable energy. Such actions have already led to numerous disputes (often subject to 'confidential' arbitration), for example between joint venture partners, and we are likely to see a sharp increase in 2025. For insurers, there is still a risk of price volatility arising from the ongoing invasion of Ukraine, which would have a knock-on effect for energy producers and their insurers, in turn increasing the cost of their policy programmes in respect of critical oil and gas facilities across the globe. While the insurance market – especially the marine and political violence arenas – have stepped up to ensure Ukrainian-linked risks can, where possible, benefit from continued insurance provision, this potential knock-on effect has more wide-reaching consequences.

Before any legislation for the proposed Hillsborough Law is introduced, there will be fundamental questions to be addressed, particularly over the implications of the planned duty of candour on the right to silence and the right against self-incrimination. Following the King's Speech and the Labour Party conference, Sir Kier Starmer promised that the Hillsborough Law will be introduced in Parliament before April 2025 to establish a legal duty of candour for public authorities in the aftermath of major public tragedies. Back in 2017 when the original Public Authority (Accountability) Bill was introduced by Andy Burnham MP, its aim was to "protect other families from going through what the Hillsborough families went through and from a similar miscarriage of justice." The Bill fell due to the general election in 2017 and there is currently no draft legislation before Parliament. It is anticipated that any future wording will closely align with that of the 2017 Bill.

In an extremely significant development for the insurance market, the Insurance Bill (No. 29/2017) will revoke the current chapter in the Brazilian Civil Code dealing with insurance and will regulate insurance, reinsurance and brokerage through separate legislation. The Bill was approved in the Brazilian Senate in June 2024 and sent to the Chamber of Deputies for final validation under an urgency regime. One of the main changes brought in by the draft legislation relates to claims adjustment. Insurers will have to conclude claims adjustment in 120 days for large risks and 30 days for mass risks. Failure to meet this requirement would preclude the right to reject the claim. In addition, early liquidated damages should be paid within 30 days of receipt of documentation; in cases of denial, the claim adjustment report should be disclosed to the insured. Another significant change relates to limitation. The limitation period for insurance, reinsurance and retrocession claims would be one year. Finally, for reinsurance, silence from reinsurers as to whether they accept or reject the reinsurance proposal from the cedant will be deemed as acceptance after 20 days.

The jurisdiction of the Financial Reporting Council (FRC) is currently restricted to those who audit accounts (the auditors) and does not extend to those who prepare them (the directors). The FRC has long argued for this to be rectified but political lethargy has prevented the necessary legislation being passed. With the change in government, 2025 may see a move to change this situation, with directors being brought within the remit of the body replacing the FRC, namely the Audit, Reporting and Governance Authority (ARGA). The impact this would have on accounting investigations and corporate governance more generally cannot be overstated, and will play out in profound ways over the coming years.