Insurers have traditionally offered protection against strikes, riots and civil unrest (SRCC) at no additional cost, but the increased frequency and severity of these risks has meant that property insurers have started to exclude social unrest events from the public. fonts, according to a report released by Chubb.
“Due to the increase in frequency and losses, property insurers are increasingly looking to limit SRCC coverage, especially for assets most susceptible to damage or located in the central business district. or in major metropolitan areas where large-scale damage can occur, ”said the report Confidence in Conflict: Insuring Your Business Against Civil Unrest.
The report aims to help reduce the risk of disputed claims and ensure that risk managers, their businesses and assets are adequately protected by clear and understandable SRCC insurance coverages.
The first step in SRCC’s risk planning is to identify insurance programs that offer the appropriate coverage, the report recommended. “To prepare for the potential damage and disruption caused by civil unrest, risk managers must ensure that tailored insurance programs are in place to protect their balance sheets and international assets,” he said. .
“It is essential that risk managers and business leaders are aware of the changing spectrum of risks and the effects this will have on their insurance programs,” the report said. “Now more than ever, insurance policies covering losses caused by civil protests and political uprisings need more clarity and transparency in order to provide the coverage and certainty that customers demand.”
It is also essential that businesses understand the limitations and exclusions that may affect SRCC’s loss coverage, as well as the specific risk exposures during civil unrest events that will impact their business.
Black Lives Matter events
The report looked at some recent examples of civil unrest around the world, including last year’s Black Lives Matter (BLM) protests after the murder of George Floyd, and their effect on insurance policies. More than 26 million people have come to the United States to protest police brutality and racial discrimination. “Protests have often degenerated into violence and looting and, according to the US Property Claims Service, property damage has totaled more than $ 2 billion,” the report recalls.
“Traditional property insurance policies have been tested [as a result of the BLM protests] as questions arose about the immediate causes and underlying motivations of the individuals involved in the protests, ”the report said.
“While the disruptions have been occurring for many months and in 20 states, they have pushed the boundaries of property insurance and highlighted the need for precise language that defines which risks are covered by a policy and which ones. are excluded ”.
The BLM protests also showed that a business with losses could have benefited from standard SRCC coverage as part of its property policy, and that an extension of political violence would have been more likely to cover all damage resulting from protests, according to the report.
Highlights of the report
Key takeaways from the report include:
- Property damage insurance previously covered civil unrest-related losses, no questions asked, but this is no longer the case.
- Stand-alone SRCC policies and extensions of political violence policies are more likely to provide comprehensive protection.
- Standard terrorism insurance generally covers isolated and covert terrorist attacks, but not civil unrest at street level.
- Standard comprehensive insurance policies generally exclude events related to terrorism or war. This generally includes insurrection, rebellion, revolution, war and civil unrest equivalent to or assuming the proportions of an uprising.
- Different policies can define perils in different ways, so a successful property and terrorism insurance program relies on consistency of language.
- SRCC coverage is increasingly offered by specialist insurers, which use more stringent definitions and aggregate losses.
- It is important to pay attention to the language of the police and to work closely with brokers and insurers, in order to avoid headaches in the event of a claim.
- The distinctions can become blurred as episodes of civil unrest grow in complexity and magnitude. During the Arab Spring, several countries experienced regime changes preceded by violent unrest and policyholders discovered that they did not have adequate coverage for the developing circumstances.
- Traditional definitions of political violence and civil unrest have again been called into question by recent events in Chile and Hong Kong and by the BLM movement in America.
- In collaboration with their insurers, companies must closely monitor key risks and protect themselves by securing their premises, people and supply chains, and having an effective business continuity plan.
- It is therefore essential that risk managers and business leaders are aware of how events and circumstances can evolve over time, potentially triggering different insurance policies.
“[R]Risk managers need to ensure that tailored insurance programs are in place to protect their balance sheets and assets. Using case studies, the report aims to initiate an essential dialogue with risk managers on evolving risks, their SRCC protection needs and how to respond to them in this complex environment, ”said Piers Gregory, Head of Terrorism and Political Violence, Chubb Overseas. General and co-author of the report, in a statement accompanying the publication of the report.
“Now, more than ever, insurance policies covering losses caused by civil protests and political uprisings need more clarity and transparency to provide the coverage and certainty that customers demand,” added Gregory.
“It is essential that companies understand the limitations and exclusions that may affect SRCC’s loss coverage, as well as the specific risk exposures during civil unrest events that will impact their contracts,” he said. He underlines.
“The recent civil unrest has highlighted the interpretation and application of the traditional civil unrest risks typically seen in insurance policies,” said Patrick Foss, partner at global law firm Kennedys, who provided an overview legal contribution to the report.
“As always, clear wording of policies is of the utmost importance, and both insurers and policyholders should carefully consider the terms of their policies and how they are likely to respond to various scenarios,” he said. .
The report was also developed with data from information, analytics and solutions specialists IHS Markit.
Photograph: Pedestrians walk past the burnt-out ruins of the Minnehaha liquor store near the 3rd Minneapolis Police Station on Tuesday, June 2, 2020, in Minneapolis. Protests followed the death of George Floyd, who died after being held by Minneapolis police officers on May 25. Photo credit: TBEN Photo / John Minchillo.
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