Empirical essays on geopolitical risk: insurance, firms and energy

Globalization shaped the world economy for much of the past three decades, but the rise of geopolitical risk since the 2010s has accelerated geoeconomic fragmentation, challenging that baseline. This thesis studies how geopolitical risk propagates through the real economy and financial markets, closing evidence gaps in three domains: insurance, commodities, and non-financial firms. First, by introducing novel methodologies in the insurance literature, such as local projections, we show that geopolitical-risk shocks raise premiums and strengthen technical reserves, consistent with both stronger demand and tighter underwriting, while simultaneously weakening solvency and market-based equity metrics, revealing distinct underwriting and market transmission channels at work. Second, identifying producerside geopolitical shocks using a novel granular instrumental variable approach, in oil, gas and critical minerals markets, we find that shocks lift benchmark prices and pass through to global inflation, highlighting the importance of the supply channel for the transmission of producers geopolitical risk. Third, to capture the revenue transmission channel for non-financial firms, we build an innovative firm-level geopolitical risk exposure index by combining firms’ geographical distribution of revenues and their destination markets’ risk, finding that greater firm-specific exposure depress investment, sales and financial performance and shapes firms’ operational strategies. Taken together, this thesis focuses on the multi-channel transmission of geopolitical risk across insurance, commodity, and firm outcomes, advancing the literature with new identification strategies and underscoring the macro-financial importance of these mechanisms for policy and research.