The UK is set to remain a relatively low‑risk environment for doing business but weak productivity, high debt and political uncertainty are expected to curb growth and keep commercial risks elevated, according to Allianz Trade’s latest Country Risk Atlas.
For insurers and brokers, the message is nuanced: the headline AA1 country risk rating signals a low likelihood of systemic non‑payment, yet the underlying picture points to persistent pressure on trade credit, surety, D&O and wider commercial lines as insolvencies and margin strain remain elevated.
Low risk on paper, but limited growth to absorb shocks
Allianz Trade has maintained the UK at an AA1 country risk rating, one of the stronger grades on its scale, reflecting strong institutions and a relatively predictable policy and legal environment. The rating implies a low probability of widespread defaults or transfer and convertibility restrictions.
Beneath that, however, the insurer expects GDP growth to slow to about 1% in 2026, from 1.3% in 2025, with only a modest improvement in 2027. Policy‑driven supports are expected to fade, leaving an economy that Allianz Trade believes has “little spare capacity” to grow much beyond around 1.5% a year on a sustained basis.
Slower, capacity‑constrained growth matters for commercial underwriters because it limits firms’ ability to trade out of higher debt and cost pressures. It suggests a prolonged period in which premium growth in some lines may be driven more by rate and exposure inflation than by real economic expansion.
Insolvencies high, commercial risk now the main concern
From a trade credit and financial lines perspective, the most important signal in the Atlas is Allianz Trade’s assessment that commercial risk has now overtaken economic, political, business‑environment and financing risk as the most significant threat facing UK corporates.
Business insolvencies, which surged after the withdrawal of pandemic‑era support and sharp interest‑rate hikes, have broadly stabilised since 2024 but remain high by historical standards. Allianz Trade forecasts a gradual decline in failures through to 2027 as financial conditions ease and wage and price pressures abate. Even so, insolvency levels are expected to stay above their 2012 to 2019 average.
For credit, surety and trade‑related covers, this points to continued elevated claims frequency, particularly among highly leveraged SMEs in construction, retail, hospitality and energy‑intensive industries. Underwriters are likely to keep a tight focus on sector and counterparty selection, underwriting information quality and shorter credit terms, even as broader macro indicators look benign.
Debt, productivity and politics: pressure points for D&O and PI
Allianz Trade highlighted UK public finances as a central vulnerability. Gross public debt is around 100% of GDP, up from roughly 85% pre‑pandemic, and is projected to edge higher at least until 2027. With most fiscal consolidation pushed beyond the forecast horizon, the report warns this could undermine market confidence and keep borrowing costs elevated for both the state and households, including via higher mortgage rates.
Combined with weak private‑sector productivity – which Allianz Trade flags as a growing concern – and political uncertainty, this backdrop has clear implications for D&O, professional indemnity and financial institutions books. Higher financing costs, fragile profitability and policy instability increase the risk of corporate restructuring, distressed asset sales, shareholder disputes and regulatory interventions, all of which can feed into claims activity.
Political risk is not at crisis levels, but the report noted falling public support for the government and internal divisions, alongside markets’ sensitivity to perceived fiscal missteps, with the 2022 mini‑Budget still fresh in investors’ minds. That mix reinforces the need for closer monitoring of policy announcements and market reactions in pricing and capacity decisions.
Institutions still a strength - but external fundamentals weaker
The UK’s AA1 rating rests heavily on strong institutional and business‑environment scores, namely on robust property‑rights protection, judicial effectiveness, openness to trade and finance and high governance marks for regulatory quality, rule of law and control of corruption. For insurers, this supports the case for continued appetite in long‑tail lines and large limits, as legal and contractual certainty remain comparatively high.
Those strengths increasingly sit alongside weaker external and fiscal fundamentals, though. A long‑running current‑account deficit, deteriorating goods trade, a stronger real effective exchange rate after high inflation and ongoing Brexit‑related frictions with the EU all weigh on competitiveness. This combination may influence political risk, credit and supply‑chain‑related covers, particularly for exporters and import‑dependent sectors.
Global context: clusters of risk outside the UK
Allianz Trade’s global view provides further context for insurers’ portfolio management. In 2025, the firm upgraded 36 country risk ratings and downgraded 14, suggesting broader resilience despite geopolitical tensions and trade disputes. Upgrades were concentrated in markets such as Argentina, Ecuador, Hungary, Italy, Spain, Türkiye and Vietnam.
However, downgrades have almost tripled compared with 2024, and now include France, Belgium, Brazil and the US – together accounting for around one‑third of global GDP. That pattern suggests UK‑based carriers and brokers may increasingly face higher risk clusters abroad than at home, underlining the importance of a selective, country‑by‑country approach to credit, political risk and multinational commercial programmes.
