According to Mohit Pande, CUO, Property, Swiss Re, assessing and adequately pricing for the risk of Strikes, Riots and Civil Commotion (SRCC) is crucial for insurers and reinsurers and an area that should continually improve.
Writing in a company blog post on the matter, Pande observed that the impacts of SRCC are at a historical high in both frequency and severity.
As per Pande, there are a range of contributing factors for this increase, including the resurgence of activism around key global issues such as the environment and diversity, equity, and inclusion; political grievances; economic ill feelings; rising conflicts; and urbanisation.
Outlining steps the (re)insurance industry can take in response to this heightening SRCC risk, Pande said, “Exposures must be considered, assessing everything from geographical value distribution, exposed occupancies and locations to recent socio-political developments and previous SRCC loss experiences.”
He continued, “Coverages also need to be considered, looking at silent coverage versus explicit extensions, and the extent of specific provisions such as exclusions or limitations. Here we (Swiss Re) are working with clients to ensure contract certainty and implement clauses to help contain the risk whilst also providing adequate coverage to their clients.”
Pande also highlighted the need for the industry to develop better models to take control of accumulation risks and identify where exposure concentrations exist within their portfolio for a specific geographic area or industry.
“The insurance industry also needs to do more to properly capture exposure data specific to SRCC and ensure it flows through the (re)insurance value chain. Swiss Re is already helping clients by providing data insights that can help highlight accumulation issues, especially to susceptible occupancies,” he added.
Pande went on, “SRCC risk exposure also needs to be contractually captured in a more effective, clear, and transparent manner, helping implement boundaries for certain risks. To this end, contractual wording assessment must be enhanced.
“Part of those efforts should include revisiting those definitions of SRCC that are included within contracts to avoid carrying for anything outside of the expected parameters. It’s difficult to draw exact lines, of course.
“However, transparent and accurate definitions can help in distinguishing key differences, such as between riots and terror events, for example.”
Concluding, Pande voiced his contentment to see that some steps are being taken, with risk awareness “clearly increasing” in the market.
Pande continued, “We’ve seen some positive effects from the implementation of government pools in some geographies dedicated to SRCC that can help to provide affordable cover against increasing risk severity.
“However, we must prepare for a world in which potential centres of SRCC break-out have multiplied and can spread more quickly and widely.
“As social economic factors increase the magnitude of loss and the unpredictability of the risk, it’s paramount that the industry leverages data and technology to manage this growing risk through improved exposure assessment, adequate risk pricing, better accumulation control and clear contractual wordings.”
