Chile Insurance Market Update: Strike, Riot, Civil Commotion Coverage

Organizations in Chile continue to face difficulty in obtaining strike, riot, and civil commotion (SRCC) insurance coverage from their “all risk” carriers, a trend that has the potential to spread to other Latin America countries.

After more than a year of social distance measures to help stem the spread of the COVID-19 pandemic, increasing vaccine availability is bringing hope of a return to normal in many places, even as others continue to see rising cases. But as countries eventually lift restrictions, protest activity, which largely stalled during the pandemic, could increase.

Protests, when they lead to riots and other violent acts, can threaten people’s safety, business’s operations, and organizations’ assets, depending on the size, duration, location, and potential violence of events. Businesses can purchase risk transfer products to mitigate the impacts; however, concern about protest activity comes as many carriers in Chile already exclude SRCC coverage from their all risk policies.

Recent exclusions were mainly a reaction to widespread demonstrations and riots in the country in the past two years. Political risk in Chile, which is generally considered to have a stable political environment, increased in 2020, according to Marsh Specialty’s Political Risk Map 2021.

If protest activity increases elsewhere in Latin America, challenges to securing SRCC coverage could become more widespread.

Securing Coverage Becoming More Difficult

From retailers to construction companies, businesses across Chile have been affected by current SRCC policy exclusions. A large number of businesses, cognizant of the importance of SRCC insurance, sought standalone coverage from the London market. However, coverage available for Chile-based companies — especially for retailers in high risk areas, as well as infrastructure operators, and companies with government-linked assets — is often restricted, with extensions that were previously common no longer commercially available.

Organizations in other countries in the region generally are able to secure SRCC coverage as part of their all risks policy, or from standalone SRCC providers at historically comparable rates. However, there are concerns that unresolved socioeconomic and sociopolitical challenges could increase protests.

Colombia, for example, has recently seen thousands take to the streets to protest a tax reform proposal. If such protests happen elsewhere, businesses in other Latin American countries could experience similar exclusions to Chile’s, which may, in turn, increase pressure on standalone capacity.

At-Risk Companies Should Take Immediate Action

Businesses considered high-risk — including those in city centers, with high-profit goods that may attract looters, and/or that are seen as government supporters — should review the wording of SRCC coverage, whether it is part of an all risks policy or standalone. A review can, among other things, help identify coverage gaps. Special attention should be paid to exclusionary language, which should be discussed with your broker or insurance advisor.

In addition, insureds need to understand the terms and conditions of SRCC coverage and map out how it may respond to different situations, such as physical property damage, loss of access and attraction, or disruptions to the supply chain, reputation, or employees.

Businesses that purchase standalone coverage should work with their broker to understand how this complements their all risks policy and identify any coverage gaps or gray areas. Understanding challenges now can help businesses take steps to avoid disputes or delays in claims settlement if their properties or assets are damaged during protest activity.

This is also a good time for businesses to review their overall risk appetite and gain a better understanding of their risk tolerance, helping them prepare for renewal meetings. Considerations can include increasing retentions and redefining coverage, especially if there is concern about potential pricing increases.

Organizations in Latin America should also take stock of their physical security measures, and determine whether these should be upgraded in line with potential increased risk.

Meet the author

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Rob Gummer

Political Violence and Terrorism Broker, Bowring Marsh