Teneo’s Kajiwara: Insurers should be aware that peaceful transition of power in the US is not guaranteed

The US election is the biggest risk on the horizon for insurers this year, according to Kevin Kajiwara, co-president of Teneo, a corporate consultancy that specialises in CEO advisory.

Speaking to The Insurer TV, Kajiwara said the risk was particularly acute given the potential for an unpeaceful transfer of power.

“As we look towards 2025, the single biggest risk out there is what role the US is going to play and what capacities and competencies it puts to work to see that vision through, and that's going to be determined by this election.”

“The point is that we don't yet know which way this is going to go. And we cannot say without a doubt that you're going to have an absolutely peaceful transfer of power.”

“And also, the two outcomes will matter. The institutions of state held after the last election in the US, but they were definitely bent to a certain degree,” said Kajiwara.

If civil unrest were to spill out from the US election, it would add pressure on an already strained line of business, with Swiss Re noting a 329% increase in political violence claims since 2000 and Howden calculating last year that premiums had risen by 80 percent since 2018.

With the election and its outcomes too close to call, Kajiwara urged insurers to recognize that they were living in unprecedented times, and consequently, their risk exposures were unlikely to be accurately predicted by data alone.

“Are the datasets that you're using to base future performance or future risk metrics going to be sufficient to help predict future outcomes?”

“That's where I think there's going to have to be a bit more qualitative thinking injected into the decision-making process here.” said Kajiwara

World trade in a fragile spot

The geopolitical landscape outside of the US is also a concern for Kajiwara, especially the impact it was having on an increasingly fragile international trade network.

Kajiwara pointed to the Red Sea as an example of this, where average market rates have risen from a pre-conflict level of 0.02 to 0.03 percent of hull value to a current market average in the region of 0.75 percent.

“Talking about the Red Sea – geopolitically, as the war in Gaza continues to play out, another Iranian proxy group, the Houthi rebels, are sending missiles and other weaponry towards commercial shipping, which has now had a pretty profound effect on the amount of shipping that's going through the Suez Canal,” he said.

Environmental factors have also increased risks along trade routes. Kajiwara used the example of the Ever Given, the vessel which ran aground in the Suez Canal due to unseasonably low water levels, leading to a $600mn P&I claim being made against its insurer, the UK P&I Club.

“We've also had the Panama Canal water levels slowing down the amount of traffic that can traverse the canal,” Kajiwara said.

Watch the full 12 minute interview with Kevin Kajiwara to here more about:

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  • What half the world's populations heading to the polls means
  • How insurers should model casualty risks like climate change affected weather