Recent geopolitical developments in Venezuela have brought renewed focus to tail risks for the global insurance sector, particularly across specialty property and casualty (P&C) lines with exposure to marine, aviation, and trade credit in the Caribbean region, according to a new report from Morningstar DBRS.
“It has been widely reported that U.S. military forces carried out a large‑scale operation in Venezuela, capturing President Nicolás Maduro and transporting him to New York to face long‑standing U.S. criminal charges.
A state of emergency and armed clashes were reported in Caracas, and Venezuela’s Supreme Court installed Vice‑President Delcy Rodríguez as interim president amid deepening political uncertainty.
The U.S. has since asserted control over Venezuelan oil exports and seized Venezuelan‑linked tankers.
DBRS Morningstar noted in its report that Venezuela has long been a difficult operating environment for international insurers due to years of severe economic contraction, persistent high inflation and currency volatility, stringent currency controls, extensive international sanctions, and significant legal and regulatory uncertainty that complicates contract enforcement and risk management.
These conditions prompted many global insurers to significantly scale back or exit the market, reducing direct premium volumes and limiting capital at risk.
As a result, Venezuela gradually faded as a material contributor to earnings or risk for most large insurance groups.
Despite this retrenchment, the mentioned geopolitical developments have reintroduced Venezuela as a source of risk, primarily through regional spillover effects, as per Morningstar DBRS.
“Enforcement actions, sanctions, and heightened security activity linked to Venezuelan trade and transport could affect shipping lanes, ports, and airspace across the wider Caribbean basin,” the firm’s report explained.
Morningstar DBRS continued, “These corridors are insured globally, meaning that risk can be transmitted well beyond Venezuelan borders. For insurers, this dynamic illustrates how geopolitical risk can migrate from a country-specific issue to a regional and multiline exposure.
“Even in the absence of large insured losses, changes in perceived risk can lead to rapid repricing, tighter terms, and shifts in reinsurance availability, all of which can affect underwriting profitability and volatility.”
From a credit perspective, Morningstar DBRS observed that key transmission channels are indirect rather than balance sheet-driven, and that direct underwriting and investment exposure to Venezuela remains limited for most international insurers.
“However, heightened geopolitical tensions increase the risk of earnings volatility, loss accumulation across specialty books, sanctions-related coverage disputes, and claims settlement friction, all of which can gradually weigh on the credit profiles of insurers operating in the region,” the firm continued.
DBRS Morningstar concluded, “In our view, current Venezuela-related geopolitical tensions do not pose a systemic threat to the global insurance sector. Direct exposure to Venezuela among international insurers remains limited, and overall sector capitalisation is generally strong.
“Nevertheless, the situation illustrates how regional geopolitical developments can rapidly translate into tail risk for specialty P&C lines, particularly marine and aviation, with secondary effects on political risk, trade credit, energy-related exposures, and travel insurance.
“For insurers with diversified portfolios, disciplined underwriting, and strong sanctions controls, the credit impact should remain manageable. For more concentrated specialty writers, however, current events serve as a reminder that geopolitical risk remains a persistent and potentially volatile feature of the operating environment that requires active, ongoing management.
Marcos Alvarez, Managing Director, Global Financial Institution Ratings, commented, “For insurers with diversified portfolios, disciplined underwriting, and strong sanctions controls, the credit impact should remain manageable.
“For more concentrated specialty writers, however, current events serve as a reminder that geopolitical risk remains a persistent and potentially volatile feature of the operating environment that requires active, ongoing management.”
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