Page 38 - The Insurance Times January 2022

Risk is greater in two ways. € democratic but not free elections;
Y Firstly, emerging economies are different from € multiparty governments with changing factions;
developed economies and this gives rise to new risks;
€ historical legacy – colonial past or former
Y Secondly, risks which have a low probability of occurring communist state;
in developed countries, have a higher likelihood of € potential for violent overthrow;
occurring in emerging economies.
€ corruption;
The nature of emerging economies € control of the press though this is being undermined
by the Internet and satellite television;
Covers various physical, social, political and economic aspects
€ strong influence of the military;
that underlie the weaknesses and instabilities that
characterize their economies. € lack of legal framework or laws in place but not
enforced;
1. Physical- Emerging economies exhibit a wide range of € contracts not always honoured;
physical attributes that in one way or another tend to € internal conflict/repression;
place some limitations on the growth opportunities of € war or threat of war;
a country or make it vulnerable to external influences.
Some of these factors are: € many regulations, together with a propensity to
€ geography – large or small size, inaccessible regions bring out new ones without consultation or thinking
or barriers to travel, distance from developed them through.
economies;
4. Economic- Sound economic performance requires the
€ dependency on weather patterns –rains, El Nino country to have some competitive advantage to start
€ vulnerability to natural disaster – floods, with, which is then effectively exploited.
earthquakes; € skewed income distribution;
€ poor infrastructure – transport, utilities, etc; € managed economy – subsidized prices;
€ reliance on a few agricultures and/or primary € dependence on primary exports and/or tourism
commodities. and/or aid flows for foreign exchange;
€ net oil importers (few notable exceptions);
2. Social- The social fabric of a country will support or
€ protected home markets;
hinder its development. Some of the factors
€ IMF/World Bank support required;
€ language – often there are many local languages
but a foreign language is needed to conduct € large black economy;
international trade (English, Chinese, Spanish or € high unemployment or underemployment (but no
French being the most common); or limited state support);
€ tribal divisions;
€ religion;
€ population growth;
€ skewed population distribution – large percentage
less than 15 years of age;
€ poor health (AIDS in some countries) or poverty;
€ concept of the extended family (provides safety
net);
€ education levels low.

3. Political- In only a few emerging economies has
democracy been the norm for more than 10–15 years
€ stable but despotic/one party rule or regular
change in government;

38 The Insurance Times, January 2022