Political Risk and the Insurance Industry: A Conversation with Bhasker Natarajan
The past few months have seen rising concerns about political risk and the development of emerging markets, as scandal has rocked Brazil, international sanctions have jammed business in Russia, India has struggled to move forward with reforms, and the Chinese market saw $5 trillion in value wiped out. Against that backdrop, Bhasker Natarajan recently joined Fletcher students to discuss the challenges facing the insurance industry in markets with distinctive geopolitical risks. Mr. Natarajan currently serves as Executive Vice President at Liberty International and Chief Operating Officer for Large Emerging Markets, where his portfolio includes oversight of activities in Turkey, Russia, India, and China—or, as he occasionally calls them, the “TRIC or tricky countries.”
Mr. Natarajan began the conversation by highlighting the fundamental challenges facing the insurance industry. Consumer tastes are currently undergoing a monumental change, he noted, polling the audience to see how many participate in the sharing economy (almost all hands raised). Thus, he observed, technology becomes a key disruptor. Meanwhile, competitive intensity continues to increase, and agile, data-driven companies will be the ones to flourish.
In addition to looking to economic conditions, growth opportunities, and consumer behavior, Liberty International examines political risks and risks closely tied to political factors, including the regulatory environments and legislation concerning access and protection of data. For the purposes of presentation, each category was coded green, yellow, or red to indicate the extent to which it challenges Liberty’s operations abroad. Mr. Natarajan noted that the organization’s primary challenges in China and India relate to the data environment. In the meantime, the primary challenges in Russia stem from economic, growth, and consumer behavior patterns. Turkey, for its part, does not offer challenges so strong as to merit a red designation.
All countries received “yellow” scores for their political environments. When asked what would contribute to a “red” score, Mr. Natarajan said it would essentially require a complete or near complete breakdown of law and order. Of the TRIC countries, he posited that China likely comes closest to red for political factors, but a better example might be found in the successive economic, intelligence, and political crises Argentina currently faces. The takeaway for the audience: companies cannot compete in a world simultaneously globalized and fractious without clearheaded analysis of political risk.
- Jared Nourse, F'17