Election risk
Losses an election can trigger: violence, riots, a currency slide, a policy shift. An accumulation whose date is known in advance.
Kenya, December 2007: the disputed reelection of Mwai Kibaki set off a crisis that left about 1,100 people dead by early 2008. Mozambique, October 2024: the announcement of the results opened months of protests and unrest. Mexico, June 2024: the peso fell after a win that cleared the way for judicial reform. Three elections, three faces of the same risk. Election risk covers the losses a vote can cause: political violence and riots around polling, currency depreciation and capital flight, policy shifts that hit contracts and licenses. 2024 made it a portfolio issue: more than sixty countries and about half the world's population went to the polls. What sets this risk apart for an underwriter is the date. A hurricane comes when it comes; an election sits on the calendar months ahead, and political violence and riot accumulation concentrates over a few weeks in a single country. The market has a familiar practice for it: some underwriters suspend or cap new capacity on a country in the weeks before the vote, and reopen once results are in. The adverse selection is plain, since demand for cover rises just when the risk is easiest to read. One qualification: the worst crises often break out when results are announced or after an electoral court ruling, sometimes weeks after the vote. Not to be confused with policy change risk, which follows a regular, peaceful election, and which political risk policies only cover if it takes the form of a specified act, such as expropriation.
Textbook case: a political violence underwriter holds 40 policies in one East African country, for a $150 million aggregate concentrated in the capital. Three months before the presidential election, it stops writing new business there and renews existing policies only at capped capacity. Demand still comes in, stronger than usual, from clients who had never bought this cover before and who now want it bound before polling day.
election risk, electoral risk, post-election violence, post-election crisis, election-related unrest
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