Flint advises international businesses and investors on policy, politics, regulation and competition.
Flint advises international businesses and investors on policy, politics, regulation and competition.
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One of the most important consequences of geopolitical uncertainty is that it is no longer confined to foreign policy debates. It is increasingly appearing in financial statements, insurance markets and capital allocation decisions.
Historically, geopolitical risk was treated as a largely external concern for financial institutions. That assumption is becoming increasingly difficult to sustain.
Conflict in Ukraine and the Middle East, intensifying US-China strategic competition and growing concerns around economic security have created a more uncertain operating environment. At the same time, regulators, investors and boards expect firms to demonstrate how these developments affect risk management, financial performance and strategic decision-making.
The consequence is that geopolitical developments are increasingly influencing earnings, underwriting decisions, investment strategies and capital allocation.
What was once primarily a political issue is becoming a financial one.
Across banking, asset management, insurance and market infrastructure, geopolitical developments are influencing how firms assess risk, allocate capital, price uncertainty and communicate with investors. The institutions that respond most effectively will be those capable of translating geopolitical intelligence into commercial decision-making.
While the trend is visible across banking, asset management and market infrastructure, it is perhaps most clearly illustrated in insurance markets, where firms must determine whether geopolitical risks remain commercially insurable.
Nowhere is this shift more visible than in bank provisions, insurance pricing and the growing debate about what risks remain commercially insurable.
One of the most significant shifts is not in risk registers but in financial statements. Although IFRS 9 has long required forward-looking Expected Credit Loss (ECL) models, their application is evolving. After the pandemic, conflicts in Ukraine and the Middle East, US-China competition, and sovereign debt concerns, investors and regulators expect banks to show how geopolitics affect assumptions, provisioning, and capital plans.
Because ECL accounting is forward-looking, institutions must assess not only current conditions but also how future scenarios could affect creditworthiness. Thus, geopolitics enter financial statements through ECL models, overlays, scenario weighting, and stress tests.
Banks have added provisions, revised assumptions, and overlays tied to geopolitical risks—not driven by realized losses, but evolving views on how geopolitics may impact growth, inflation, assets, and sovereign stability.
This marks an important shift. What were once strategic risks monitored by boards now shape earnings, capital allocation, and investor communications before losses even occur. For boards and investors, geopolitical risk is no longer just strategic foresight—it’s a balance-sheet issue.
Although geopolitical developments affect the financial sector broadly, their impact is not uniform.
Commercial banks absorb geopolitical shocks through their lending books, capital positions and funding activities. Asset managers face changing market dynamics and capital flows. Investment banks help clients navigate sanctions, supply-chain restructuring, strategic transactions and market volatility.
Financial market infrastructure providers, including payments firms, custodians, exchanges and market utilities, face a different set of challenges. Cyber resilience, data localisation requirements and economic-security concerns are increasingly placing financial infrastructure at the centre of geopolitical competition.
The common theme is that political developments once considered external to financial performance are increasingly influencing investment decisions, operational models and capital allocation. Geopolitics is becoming embedded in core business decisions rather than remaining a peripheral strategic consideration.
For commercial banks, geopolitical developments create both direct and indirect challenges.
Slower growth, sanctions, sovereign stress, trade disruption and supply-chain restructuring can all affect borrower performance and credit quality. At the same time, operational resilience requirements, cybersecurity expectations and the complexity of cross-border business continue to increase.
Many of these risks ultimately feed into ECL models, capital planning and lending decisions. Institutions are increasingly expected to demonstrate how geopolitical uncertainty is reflected in risk management, financial reporting and strategic planning.
Geopolitical developments are reshaping investment management and capital markets.
Trade restrictions, technology controls, sanctions regimes and national-security considerations are introducing new frictions into global capital flows. Investors are increasingly required to assess political risk alongside traditional financial metrics when making allocation decisions.
But geopolitics is also creating opportunities.
Increased volatility can benefit active managers and trading businesses. Supply-chain diversification is driving investment into new regions and sectors, while governments are increasing expenditure on defence, energy security and critical infrastructure. Strategic acquisitions linked to economic-security objectives are becoming more common.
The challenge is no longer simply managing uncertainty. It is identifying where geopolitical developments are creating structural shifts in capital allocation and investment demand.
If banks increasingly absorb geopolitical risk through provisions and capital, insurers occupy a different position altogether.
They must price it.
No part of the financial system sits closer to geopolitical risk than insurance. While banks experience geopolitical shocks through economic conditions and borrower performance, insurers must decide whether risks remain commercially insurable, at what price, under what terms and with what capital implications.
For decades, many geopolitical risks were viewed as infrequent, geographically concentrated and broadly diversifiable. Today's environment is more challenging. Interstate conflict, cyber confrontation, sanctions regimes and concerns around critical infrastructure resilience are creating risks that are harder to model and increasingly correlated across sectors and jurisdictions.
As a result, geopolitical considerations are playing a growing role in underwriting decisions, reinsurance pricing, capital allocation and risk appetite.
The impact extends across multiple insurance markets.
Political violence, trade credit, marine and aviation insurers are all reassessing assumptions around conflict, sanctions, sovereign risk, supply-chain disruption and critical infrastructure resilience. Risks that were once considered relatively contained are becoming more interconnected across regions and sectors.
Yet perhaps no market better illustrates this shift than cyber insurance.
Historically, cyber risk was viewed primarily through the lens of criminal activity or operational failure. Increasingly, insurers are being required to assess risks associated with state-sponsored actors, critical infrastructure attacks and cyber operations that may occur alongside wider geopolitical disputes.
At what point does a cyber event become an act of war? And can losses arising from state-backed cyber activity be diversified in the same way as traditional insurance risks?
These questions increasingly sit at the heart of underwriting decisions, policy wording and reinsurance arrangements.
In many respects, cyber insurance has become one of the first markets where geopolitical competition is being translated directly into commercial pricing decisions. The implications extend well beyond cyber insurance and raise broader questions about the future boundaries of commercial insurability.
The most important question facing insurers may no longer be how geopolitical risks should be priced.
It may be whether some of those risks remain commercially insurable at all.
The traditional insurance model depends on risks being measurable, independent and diversified. Geopolitical uncertainty challenges each of those assumptions. Conflicts, cyber events, trade restrictions and critical infrastructure failures can generate losses across multiple sectors, regions and organisations simultaneously.
The challenge is particularly acute in cyber insurance, where a single state-linked event could affect thousands of organisations across multiple countries at the same time.
Research by the Geneva Association has highlighted that cyber conflict, critical infrastructure disruption and other geopolitical shocks share many characteristics of systemic risks. They are difficult to model using historical experience and can generate highly correlated losses across large parts of the economy.
As risks become more systemic, the capacity of private markets to absorb losses becomes increasingly constrained. The debate is therefore shifting from pricing towards insurability.
This matters because insurability ultimately determines where risk resides within the economy. Risks that cannot be transferred through insurance do not disappear; they remain with households, businesses, investors or governments.
As the boundaries of commercial insurability evolve, governments are increasingly being drawn into the management of geopolitical risk.
This is not a new phenomenon. Public-sector involvement has long existed in areas such as terrorism insurance, flood protection and export credit support. However, geopolitical developments are creating renewed pressure for public-private risk-sharing arrangements.
Some risks are simply too large, too uncertain or too systemic for private markets to absorb alone. Large-scale cyber events, critical infrastructure disruption and certain forms of geopolitical conflict increasingly raise questions about where private insurance capacity ends and public support begins.
As a result, the debate is extending beyond insurance markets to broader questions of economic resilience, national security and the role of government in absorbing systemic risk.
While much discussion focuses on risk, geopolitical change is also creating significant commercial opportunities.
The reorganisation of supply chains, growing investment in defence and energy security, and renewed focus on critical infrastructure are redirecting capital towards new sectors, regions and technologies. This is generating demand for financing, advisory services and risk-transfer solutions across the financial sector.
As a result, geopolitical intelligence is increasingly being integrated into underwriting, investment decision-making and strategic planning.
The commercial opportunity lies not simply in understanding geopolitical developments but in translating that understanding into better pricing, stronger underwriting and more informed capital allocation decisions.
Perhaps the most significant consequence of geopolitical change is that it is increasingly influencing how capital is allocated.
Financial institutions are reassessing where they deploy capital, which jurisdictions they prioritise and how they build resilience into their business models. Economic security, supply-chain resilience and technological sovereignty are increasingly shaping investment decisions alongside growth and profitability.
For boards, the challenge is therefore much broader than risk management. It is about determining how geopolitical change should influence long-term strategy.
The institutions that respond most effectively will not necessarily be those that predict geopolitical events most accurately. They will be those that can translate geopolitical intelligence into better underwriting, stronger capital allocation decisions, more resilient operating models and more effective risk transfer.
For banks, geopolitical developments increasingly influence provisions, capital planning and lending decisions. For insurers, they are reshaping underwriting, pricing and the boundaries of commercial insurability. For investors, they are affecting portfolio construction and strategic asset allocation.
Geopolitical risk is no longer simply a geopolitical story. It is increasingly becoming a financial one. The institutions best positioned to succeed will be those that recognise geopolitical intelligence not merely as a risk-management capability, but as a source of commercial insight, resilience and competitive advantage.
Flint Global advises companies, investors and financial institutions navigating complex regulatory, political and competitive developments across the UK, Europe, Asia-Pacific and Australia. Flint’s work spans financial services policy and geopolitical risk, helping clients anticipate policy change, assess strategic implications and position effectively in rapidly evolving regulatory environments.
Daniel Trinder is a Flint Senior Adviser covering Asia-Pacific Policy and Regulation based in Auckland. Daniel is a financial services regulation expert and has held senior roles in governments, investment banks, and global bodies, including IOSCO and the IMF. Before joining Flint, Daniel was Executive Director and Chief Economist at New Zealand’s Financial Markets Authority (FMA).