How worldwide events are reshaping the political violence risk landscape and insurance

Riot police during a strike protest in Santiago, Chile.

Political violence events have long impacted people, property, and balance sheets worldwide.

The Russia-Ukraine war, the flare up of tensions between Israel and Hamas, and recent global civil unrest have led to greater awareness of the associated risks, leading to significant shifts in the political violence* insurance marketplace. Rates are rising, limits are increasingly challenged, terms and conditions are being reviewed, and in some territories — including Russia, Ukraine, Moldova, Belarus, Israel, and Taiwan — sanction and treaty restrictions mean insurers are now unable or reluctant to offer cover.

* Political violence means strikes, riots, and civil commotion (SRCC); war; malicious damage; mutiny; insurrection; revolution and rebellion; coup d’état; and terrorism and sabotage.

Ongoing events in Israel

The Palestinian militant group Hamas launched an unprecedented terror attack on Israel beginning on October 7, 2023, with its fighters entering communities near the Gaza Strip, killing and severely wounding civilians and military personnel, and taking dozens of hostages. This is a developing situation that will be carefully watched for impacts on the political violence and political risk market.

Political violence can occur anywhere

Insurers were still writing policies in Ukraine a week before Russia’s invasion, highlighting the difficulty of foreseeing the risk of political violence. Recent political violence events globally — in many cases, taking place against a backdrop of global and socio-economic uncertainty — have been equally unpredictable, including:

France faced nationwide strikes and protests over both a new pension bill increasing the age of retirement, and riots after police shot a boy of Algerian descent.
The US has experienced a surge of harassment, assaults, and violent threats targeting civic and public officials and their families, as well as an increase in mass shootings.
Iran experienced widespread dissent following the death of an Iranian-Kurdish woman, Mahsa Amini.
In Syria, the 12-year civil war has claimed the lives of an estimated 300,000 civilians and led 22 million people to flee their homes.
In Niger, protests took place following a coup that saw President Mohamed Bazoum taken captive.
In Bangladesh, there have been ongoing protests against incumbent Prime Minister Sheikh Hasina, amid an economic downturn.
In Pakistan, at least 44 people were killed in an explosion in during a rally organised by an Islamist party.
In Sri Lanka, there have been mass protests as the country confronts its worst economic crisis since independence. Energy insecurity and food costs remain high, while there is a critical shortage of essential pharmaceuticals.
In Ecuador, violent demonstrations spread following fuel and food shortages. A state of emergency and night curfews were imposed in three coastal provinces in July, amid a wave of violence.
In Brazil, supporters of former leader Jair Bolsonaro stormed key sites in the country in January, including the presidential palace.

Note: As of November 3, 2023, the following are countries under sanctions: Afghanistan, Belarus, Cuba, Iran, North Korea, Russia, Syria, Russia-controlled regions in Ukraine, and Venezuela.

The Institute for Economics and Peace’s 2023 Global Peace Index reported a year-on-year deterioration in the average level of global peacefulness of 0.42%, with the largest regional deterioration in peacefulness in Russia and the Eurasia region. The global economic impact of violence was estimated at US$17.5 trillion in 2022 — up from US$16.5 trillion in 2021 — equivalent to 12.9% of global gross domestic product (GDP).

Global stability is predicted to continue to deteriorate. The World Bank estimates that by 2030 up to two-thirds of the world's extreme poor could live in fragility, conflict, and violence (FCV) settings.

Key political violence insurance market trends

Following the Russia-Ukraine war and events such as mass demonstrations in South Africa, global pricing for political violence insurance has risen at a pace not previously seen.

As a result, clients are re-evaluating the limits purchased and the breadth of policy terms and conditions.

Following restrictions imposed by reinsurers during 2023 treaty renewals, insurers are thoroughly reviewing programs and client data with a renewed focus on specific clauses, including contingent business interruption. Insurers are also more closely assessing key socio-economic indicators, such as food price index values, GDP, and wealth disparity, that influence coverage and conditions.
Treaty coverage for both the political violence and terrorism market continues to be under increased scrutiny in 2023. Coverage in property catastrophe treaties has been under particular pressure due to hard market conditions as reinsurers attempted to reduce exposure to non-modeled SRCC and war risks.

Reinsurers’ tightened terms and conditions relating to these risks on “all-risk” property policies from January 1, 2023, which pushed insurers to explore standalone covers for these perils. This shift increased terrorism and political violence reinsurance rates which, in turn, led insurers to increase the pricing for insureds. Similar dynamics were also experienced in the war, terrorism, political violence (WTPV) market, with prices and attachment points increasing throughout 2023.

Buying robust political violence cover is key

The ripple effect of the Russia-Ukraine war on supply chains, food supplies, and energy costs, as well as the political and socio-economic protests that have taken place globally, highlight the disruption and economic impact political violence events can cause. Organisations have faced significant disruption to business and increased costs for security and preventative measures.

It’s important when purchasing insurance to secure the most suitable coverage for your organisation’s footprint and evaluate if policies, such as active assailant coverage and non-damage business interruption, are needed. It is also important to know when a coverage such as political violence insurance may best suit your needs, or when policies that wrap around existing coverage and government programs may be most effective.

Steps organisations can take to prepare for political violence events:

Ensure business continuity and crisis plans are tested robustly and updated regularly, incorporating lessons learned from past events.
Conduct scenario planning to anticipate the potential effects of events on people, properties, operations, suppliers, and customers.
Coordinate the purchase of political violence and/or terrorism insurance with other relevant forms of coverage, including property and business interruption.
Understand how the claims process will work and be ready to gather appropriate information needed, including recording damage via photographs and video as well as capturing all extra expenses and other costs associated with recovery.

Taking these steps — and working with advisors to build the right insurance program — will help you be more prepared to respond to future events. If you would like to learn more or discuss your political violence risk exposures, whether it be through your own business operations or supply chain exposures, please contact your Marsh representative.

This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. LCPA 23/515