In recent years, the commercial insurance market for strike, riot and insurrection protection has undergone significant structural changes.
Rising losses from protests and political violence have sparked increased interest among policyholders, prompting them to review their existing coverage and limits, insurers and brokers say.
While coverage was previously available through all risk policies, reduced limits and exclusions have led to more risk managers accessing coverage through terrorism and other specialty policies, they say.
“It’s on the agenda that I’ve never seen before,” said Srdjan Todorovic, London-based head of political violence and hostile environment solutions for Allianz Global Corporate & Specialty, a unit of Allianz SE.
“Whether they have it within their property program or within a stand-alone policy for terrorism and political violence, either way clients are reviewing what cover they have in this area and potential limitations. We have seen a number of requests for higher limits around this cover,”
; says Fergus Critchley, New York-based head of crisis management North America at Willis Towers Watson PLC, in an email.In a report issued last week, AGCS highlighted large losses related to the coverage line, with more than $2 billion in insured losses following unrest in the United States following the killing of George Floyd by a police officer in Minneapolis in 2020.
Jeff Buyze, Fort Lauderdale, Fla.-based vice president, national real estate practice leader, at USI Insurance Services LLC, said the brokerage has had clients ask more about strikes, riots and civil unrest, in some cases “because they’ve had occasions” of potential gaps or gaps in coverage A municipal client was informed of issues and challenges facing municipalities and decided to purchase the coverage, he said.
Typically, “we see patterns in business classes and what one customer wants can be similar to the rest because the needs and exposures are the same, and it becomes a solution for that entire class,” Mr. Buyze.
One solution to a lack of coverage in other policies is to access coverage of strikes, riots and civil strife through a terrorism and political violence policy with parts of the coverage, sources said.
“In the past, political violence was not a threat that many clients wanted to buy into the U.S., but now to get the SRCC coverage you have to buy terrorism-political violence,” said Tarique Nageer, leader of the terrorism placement and advisory practice for Marsh USA Inc. in New York.
Mr Nageer said after the violent protests that followed George Floyd’s murder, “there was a knee-jerk reaction by some insurance companies to put conditions on policies and limit what they would offer for SRCC” in all-risk policies. Subsequently, there was an equally abrupt reaction to previous policy terms, he said.
Some restrictions have remained, said Jen Rubin, New York-based senior underwriting executive and head of war and terrorism at Liberty Specialty Markets, a unit of Liberty Mutual Insurance Co. scrutinizing the risk more than they did before the summer of 2020.”
At the reinsurance renewals on January 1, reinsurers began imposing different conditions on insurers offering terrorism and war coverage, and thus cover for strikes, riots and civil strife, Nageer said.
In recent policy renewals, policyholders faced different terms and pricing of coverage as a result of reinsurers’ moves, he said.
“The reinsurance market has transferred restrictions in the hour clause per incident and those time periods are evolving,” Rubin said of time limits and definitions of incidents in policy language.
The frequency of incidents and the resulting market pressure is not expected to abate, as the AGCS report notes multibillion-dollar losses in Latin America, Europe and North America over the past three years, and that the tensions leading to the losses have not abated.
“In recent years, SRCC events in Hong Kong, Chile, South Africa and the United States have affected reinsurance contracts, and the stand-alone markets for terrorism and political violence underwrite this coverage with much stricter coverage guidelines,” said Mr. Critchley.
Nageer noted that the United States has a potentially contentious presidential election coming up next year and that the events of January 6, 2021 at the US Capitol have not fully cleared the air, adding another layer of uncertainty and concern about potential resulting exposures in the US
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