Allianz Risk Barometer 2026 -
Global risk #4: Changes in legislation and regulation (26%)

Article | January 2026

This risk remains in the same position as last year, at #4. At first glance, that stability may seem surprising. After the volatility in tariffs seen during 2025, 2026 appears set to offer some relief for global trade. And on the regulatory front, deregulation is the prevailing political narrative – not only in Washington, but also in Brussels, where the EU Commission has pledged to cut administrative burdens. Businesses might be expected to welcome this shift. Yet the reduction in the volume of new rules carries a significant downside: growing divergence.

Many businesses are clearly concerned about the strategic divergence in how major economies are recalibrating digital, financial and sustainability frameworks. While the US appears set to continue its broad deregulatory push aimed at lowering business costs and boosting competitiveness, Europe is likely to pursue selective regulatory simplification while maintaining its long-standing commitment to robust rules and safety. Meanwhile, China is expected to maintain its calibrated approach, seeking to foster innovation while preserving state oversight and strategic control of key sectors. 

“This divergence is fast becoming a critical driver of global risk: it fragments compliance expectations, reshapes competitiveness, and increases uncertainty at a time of geopolitical, technological, and financial volatility. Three structural fault lines stand out,” according to Allianz Chief Economist, Ludovic Subran.

The EU has begun implementing the AI Act alongside the recently published Digital Omnibus Regulation, which aims to streamline and clarify elements of the EU’s extensive digital rulebook. However, simplification does not eliminate uncertainty; key operational, governance and liability concepts will continue to evolve through delegated acts, guidelines and the upcoming Digital Fitness Check. At the same time, the US is placing growing diplomatic and commercial pressure on the EU to avoid overregulating Big Tech and AI, warning that stringent rules could undermine innovation, competitiveness and transatlantic digital trade. 

Meanwhile, the US itself is pursuing a flexible model based on different rules for different sectors, while China is pairing rapid AI deployment with state-driven controls. The result is triangular regulatory fragmentation in AI governance: Europe prioritizes safety and rights, the US favors innovation flexibility and China emphasizes state control and data localization. 

“For global firms, the risk is profound: technological fragmentation. AI systems and data processes may require redesign, localization, or differentiated governance models across markets, raising costs, delaying deployment, and increasing the risk of enforcement action,” says Subran.

The US is reconsidering the Basel “endgame” in order to relax capital and liquidity requirements. The UK is pursuing a similar, competitiveness-driven recalibration. In contrast, the EU remains committed to strictly implementing Basel. This creates a gap in the level playing field, with European institutions potentially carrying higher structural capital and compliance burdens than their peers in the US or Asia. While lighter requirements do not automatically imply more lending, 2026 could see regionally divergent financing conditions emerge.

The EU is easing parts of its environmental, social, and governance (ESG) agenda by narrowing the obligations of the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). 80% of companies are now outside the scope, reporting requirements have been vastly simplified, and obligations relating to the civil liability regime and transition plans have also been scrapped. Meanwhile, the US is backing away from several federal climate commitments, and other jurisdictions are pausing or recalibrating their sustainability trajectories. The result is a fragmented global ESG environment. Multinationals face compliance asymmetry, whereby they may be judged against the strictest global standard, regardless of local requirements. This creates legal uncertainty and reputational exposure, as well as strategic misalignment between subsidiaries and markets.