The total number of national elections will increase 14% next year, from 56 globally in 2023 to 64 in 2024, according to research by specialty re/insurance group Chaucer, leading to a steady increase in demand for political risk insurance.

Countries with elections in 2023 have a combined GDP of US$9.89trn – this will more than fourfold increase to a combined GDP of US$40.79trn in 2024. This increase in combined GDP represents a jump from 9.8% to 40.6% of the world’s GDP going to the polls next year.

Chaucer warns that the increase in elections and the size of the economies at stake presents increased political risk for businesses operating in countries that face political uncertainty. It says that when governments are struggling to pay their bills, this can increase the risk that businesses can find their public sector contracts suddenly cancelled or go unpaid. Businesses have increasingly been insuring against governments failing to pay their bills by buying “contract frustration” cover.

Contract frustration insurance is seeing an uptick in demand as businesses look to mitigate the risk of contract cancellation by governments. Chaucer says government contract cancellations spike in frequency after a change in government, so an increase in elections – itself increasing the likelihood of government change – is driving up demand for contract frustration cover.

Jonathan Bint, senior underwriter and analyst at Chaucer, points to elections in the US and South Africa being particularly important, the former always so due to its sheer size. He said: “Not only are more elections taking place next year than this year, but crucially these elections will affect key major economies around the world. 2024 could be a year of significant political change which we believe could lead to political risk insurance being pushed further up the boardroom agenda.”

“Organisations from governmental outsourcers to major state creditors should be looking at which of these elections they are exposed to. Those who don’t currently have cover should speak to specialists about how to manage the risks involved in political change.”

Bint believes that a number of 2024 elections could prove particularly important from a political risk perspective, including votes in Indonesia, South Korea, India, South Africa, Mexico and the US, as well as a likely general election in the UK.

He added: “We’ve seen how volatile markets become when political candidates with unorthodox economic policies look likely to win. Political risk is an inherent feature of the democratic process. Political risk cover exists to help businesses handle this volatility, knowing that their own risk profile is manageable.”

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