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The actions of the United States has dominated political risk in 2025 so far, according to WTW’s Political Risk Survey 2025.
The company’s eighth annual political risk survey found that for 74% of globalised companies that took part in the survey, political risks appear among the top five risks on the enterprise risk management (ERM) risk register. For 11% of respondents, it was the number one risk.
“In the world of political risk, 2023 was the year of Russia (in which companies recognised their losses stemming from the Russia-Ukraine conflict); 2024 was the year of the Middle East; and 2025 (so far) the year of the United States,” said the preface in the report. “Last year, nearly 40% of our survey respondents said they had experienced a negative financial impact from the conflict in the Middle East – in most cases, due to disruption of supply chains.”
This year, the report continued, nearly 60% of respondents said they expected the trade wars of the Trump administration to have a negative impact on their finances. That was a similar proportion to those saying the Ukraine conflict had negatively impacted their business in 2023.
For insurance asset management, the risks could be both short-term, which would affect more non-life insurers, and also long-term, with structural changes to the world economy and a lessened belief in the stability of the US dollar, which could see more effects for life insurers that invest over longer periods.
The tariffs and trade war have already created headaches. Stocks have been volatile since Trump announced his first round of tariffs on April 2, with the S&P 500 initially dropping nearly 15%, only to stabilise and climb for the last nine straight sessions through Friday, its longest streak since 2004.
Yesterday’s losses were related largely to Trump’s proposed 100% tariffs on “foreign made films” coming to the US, which he said would strengthen Hollywood.
The report said the shift towards US policy as a driver of political risk is “not as new as it might at first appear”.
Many of the themes also appeared in Insurance Investor’s Advisory Board Q1 2025 round-up, where several Chief Investment Officers from North America and Europe discussed prescient issues to the market. One of the main concerns was the inability to judge how markets would react to Trump’s barrage of policy announcements on a regular basis. For instance, would the volatility just become factored into decisions, or would it continuously cause dips and peaks?
The WTW report said the US’s volatility, however, had long been a concern. “As far back as 2021, the US appeared on our annual top ten list of countries where companies experienced political risk losses,” it said. “At the time, the losses were driven by US export controls imposed against China (which negatively impacted US microchip manufacturers) and US secondary sanctions imposed on Iran (mostly impacting European and Asian companies with investments in or trading relationships with Iran).”
The undermining of the rules-based order is also undermining the effectiveness of diversification as a political risk mitigation strategy, panellists said.
In WTW’s report, a European energy executive said that tariffs on China were not a problem for their highly globalised company because “we can just shift our portfolio around.” But the collapsing infrastructure of globalisation could undermine that approach.
The report asked for ideas and strategies businesses were taking to mitigate possible risks.
“The most popular response, by a comfortable margin, was diversification,” it said.
“A diversification strategy tended to work well in a highly globalised world where most countries were stable and welcomed Western foreign investment,” it said. “It is questionable whether diversification will be such a successful strategy in the future, given pressures towards “friendshoring” and attempts by the new US administration to crack down on efforts to reroute China trade through third countries.”
Out of the top risks being mentioned were several bubbling away.
The leader by number of mentions in the ‘below the radar’ section was threats from Russia. “Even as the US seeks a ceasefire in the Ukraine conflict, Russia appears to be escalating its grey zone attacks on Europe, ranging from the shocking (disrupting Romania’s election, noted above) to the alarming (attempts to place parcel bombs on freight flights) to the bizarre (a recent arson attack on a retail store in Lithuania),” it said.
The second ‘below the radar’ risk is African realignment. “As we noted last year, Sub-Saharan Africa has recently suffered a coup epidemic, with at least ten coups and several additional coup attempts (compared to less than one coup a year on average for the past three decades),” said the report. “Some of these coups, notably in Mali and Niger, have been associated with shifts in geopolitical alignment – countries have “flipped” from being western allies to close allies of Eastern powers (notably Russia).”
The report focused on these as future risks to be aware of. The theme of misinformation as well as possible geopolitical realignment and ensuing instability, are notable for investors as future geographies or sectors may become untenable to invest in.
This could be of particular concern to investors who focus on emerging markets, energy, or infrastructure.
The survey had 66 respondents; there were 15 participants in the interview panel. Most of 2025’s respondents were clients of WTW and Oxford Analytica. The report said the sample is biased towards the world’s largest or “leading” multinational firms, which tend to invest heavily in the management of political risk.
