Building a Responsive Insurance Program Amid Growing Political and Social Unrest
The recent attack on the US Capitol Building is a shocking reminder of the dangers that political violence can pose to people, organizations, and governments. It followed months of unrest across many major American cities, and it’s part of a broader, global trend.
For businesses, political violence, terrorism, and extremism can threaten the safety of your people, operations, and assets. Several forms of insurance can help mitigate those impacts, so it’s important to know how all of the pieces can fit together.
Political Violence, Terrorism Threats Evolving
While the events in Washington have dominated headlines, the inherent risk is not limited to capital cities or even the United States. Unresolved socioeconomic and sociopolitical challenges — including unemployment, inequality, and corruption — have contributed to greater political polarization and driven protests since the start of 2019 in developed and emerging markets alike. These include Brazil, Chile, France, Hong Kong, Lebanon, and the UK, among others.
Terrorism, meanwhile remains a threat, although the nature of that threat is changing. In recent years, governments have made progress in fighting the Islamic State and other large terrorist organizations. In the US, however, 2020 saw a sharp rise in domestic extremist violence, with the US Department of Homeland Security noting that racially and ethnically motivated violent extremists remain “the most persistent and lethal threat” to the nation.
Again, this is not a US-only phenomenon. In the UK, for example, a top counterterrorism official in the Metropolitan Police recently warned members of Parliament of the vulnerability of minors to radicalization by extremist organizations. Security forces in France, Germany, and elsewhere are similarly focused on domestic extremism.
The line between “terrorism” and “political violence” can be blurry. The nature of the events you seek to protect against, and how insurers and governments categorize those events, should inform the type of coverage you consider purchasing.
- Property terrorism insurance provides coverage for physical damage and business interruption resulting from acts that are motivated by politics, religion, or ideology.
- Political violence (PV) insurance provides coverage for physical damage related to war, civil war, rebellion, insurrection, coup d’état, and other civil disturbances; it may also include terrorism and business interruption coverage.
- Coverage for strikes, riots, and civil commotion can be added to terrorism or PV policies through what is commonly called a SRCC extension.
- Active assailant insurance can complement the general liability and property coverage that most businesses already purchase, offering affirmative coverage that is triggered by physical attacks by active assailants who are physically present and armed.
Consider Broader Risks
It’s important to understand the terms and conditions of each policy — including loss of access and loss of attraction — and the effect that disruptive events can have on your supply chain, reputation, and employees.
It’s also important to be mindful of each policy type’s limitations. For example, traditional property insurance policies may respond to some losses from recent events, but without physical damage, any ensuing business interruption may not be covered. To protect employees, meanwhile, employers should look to workers’ compensation, employee benefits, and other forms of coverage.
Buyers should also be aware that property terrorism and PV insurance policies do not cover all forms of political risk. Broader political risk insurance policies can protect against a variety of government actions, including expropriation, forced abandonment or divesture, currency inconvertibility, nonpayment, and contract frustration.
Building the Right Program
In considering which insurance options best suit an organization’s exposures, it’s important that risk professionals review and assess property and employee exposures, including the location of key assets and concentration of employees in specific locations. Risk appetite also plays an important role, and may affect the limits you select for any policies you purchase.
The world remains unpredictable and the dangers of uprisings, political violence, active assailant incidents, and terrorism will persist for businesses. To remain resilient to such threats, it is vital that you develop an effective risk management strategy that includes preparedness for potential incidents and understanding the various forms of insurance. Work with your insurance advisors to review your coverage offerings and build effective insurance programs that protect your people, operations, and physical assets.