Your Business in China May Be Uninsurable

Western companies are losing their enthusiasm about doing business with China. The American Chamber of Commerce in China reported in March that only 45% of surveyed companies called China a top-three investment priority, the lowest figure in the report’s 25-year history. A new survey from the European Union Chamber of Commerce in China finds that multinationals are shifting investments and Asia headquarters out of the country.

The trend is likely to accelerate, as companies struggle to find insurance against the political risks of doing business in China. “We’re witnessing a sharp contraction in underwriter appetite,” a political-risk executive at a global insurance broker said. “Companies that have multiyear coverage can continue to utilize it, but companies that need new policies are struggling. A couple of private-market underwriters are willing to sell, but many have burdensome criteria lists and will only offer to companies in sectors they assess as very benign.”

Political-risk coverage, which insures companies against politically motivated calamities ranging from expropriation to war, is the lifeblood of the globalized economy. The demand for such policies declined during globalization’s most harmonious years, but in an unstable world, companies are deciding they need it again. Last year 68% of major corporations bought political-risk insurance, up from 25% in 2019, according to a report by WTW, an insurance broker.

Read the full article at The Wall Street Journal