Building a Responsive Insurance Program Amid Growing Political and Social Unrest
From Minneapolis and Portland to New York and Philadelphia, cities across the US have experienced widespread civil unrest this summer. And it’s part of a broader, global trend: Unresolved socioeconomic and sociopolitical challenges — including unemployment, inequality, and corruption — have driven protests since the start of 2019 in many places, including in Brazil, Chile, France, Hong Kong, and Lebanon.
Terrorism, meanwhile, remains an ever-present threat, even as governments make progress to combat the Islamic State and other large terrorist organizations. The November 2019 London Bridge stabbing and other recent events are a reminder of the dangers posed by terrorist groups, including in advanced economies.
Political violence and terrorism can have significant effects on your people, operations, and assets. Several forms of insurance can help mitigate those impacts, but it’s important to know how all of the pieces can fit together.
The line between “terrorism” and “political violence” can be blurry. How insurers and governments distinguish between the two should inform the type of coverage you buy.
- 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 related to war, civil war, rebellion, insurrection, coup d’état, and other civil disturbances.
- Coverage for strikes, riots, and civil commotion can be added to terrorism or PV policies through what is commonly called a SRCC extension.
Consider Broader Risks
It’s important to understand the terms and conditions of each policy — particularly 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 their 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.
In addition, 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 divestiture, currency inconvertibility, nonpayment, and contract frustration.
Building the Right Program
In determining which insurance options best suit you 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. It’s also important to determine your risk appetite, which can be crucial in determine appropriate limits for any policies you elect to purchase.
As the world remains unpredictable, the dangers of uprisings, political violence, and terrorism will persist for businesses. It is vital that you understand how the various forms of insurance work and be ready for potential losses. Work with your insurance advisors to review potential coverage options and build effective insurance programs that protect your people and physical assets.