Civil unrest overtakes terrorism in insurance claims

Civil unrest has caused more than $10bn of insurance and reinsurance losses across the globe since 2015 compared with less than $1bn from terrorist attacks, spooking underwriters and fuelling a surge in the cost of cover.

The figures are included in a report from insurance broker Howden that explores how “rising discontent”, driven by the increasing cost of living and other social pressures and stoked by social media, has driven up the frequency and size of claims on strikes, riots and civil commotion insurance. This typically covers property owners against damage in such episodes.

“We have gone from a relatively loss-free market over the past 20 years to a market that is suffering serious losses,” Tom Bradbrook, executive director at Howden’s speciality insurance business, told the Financial Times.

The report highlights demonstrations in Chile in 2019, which led to episodes of violence and looting that damaged supermarkets, pharmacies and transport infrastructure; the Black Lives Matter protests in the US the following year, with unrest in several cities featuring some vandalism and looting and insurance payouts across 20 states; and another hit for insurers from South Africa’s 2021 unrest.

The prevalence of civil unrest-related payouts marks a turnround from the 1990s and early 2000s when terrorism dominated the wider insurance market covering political violence. Terrorists have since turned their focus to targeting civilians in attacks that have left much less insurance damage.

In South Africa, insured losses in recent years from strikes, riots and civil commotion have exceeded those from natural catastrophes, Howden said.

Some insurers and reinsurers have responded by withdrawing cover, pushing up prices across the board. In the broader sector of political violence insurance, which also includes policies that cover properties against war-related damage, prices have surged 80 per cent since their recent low in 2018.

Russia’s invasion of Ukraine has had a serious impact on political-violence insurers, with payouts for destroyed buildings one of the main areas of claims paid by carriers, typically to western companies operating in the country.

Bradbrook said in insurance terms “a lot of the losses are [still] unknown” in Ukraine.

This year has had an “ominous start” Howden said, with protests across Brazil and Peru causing more losses. Bradbrook said the pension protests in France and the Black Lives Matter unrest showed that disruption in big economies was increasingly an area of worry for insurers.

A report earlier this year from German insurer Allianz highlighted that incidences of strikes, riots and civil commotion had “not only increased in recent years, but have become more intense and catastrophic”.

Srdjan Todorovic, head of political violence and hostile environment solutions at its specialty arm, wrote that the “rapid galvanising effect of social media means unrest can occur in multiple locations simultaneously, and retail chains, for example, can suffer multiple losses in one event.”