With inflation-driven political unrest in Latin America fuelling a rise in demand for political violence insurance, specialty re/insurer Chaucer’s Political Violence insurance product has an extension for Mexican cartel activity.
There was an increase in the number of protests and riots in Latin America last year, from 5,261 in 2021-22 to 5,575 in 2022-23.
Chaucer says the rise in protests is predominantly driven by inflation, leading to food insecurity and exacerbated poverty in many countries across the region. A number of protests have also been sparked by increasing energy costs in the aftermath of the Russian invasion of Ukraine.
Panama and Ecuador saw the most significant increases in social unrest in the past year. Panama saw a 132% increase in protests and riots from 22 to 51 as protesters demanded relief from high energy and food prices. Ecuador’s numbers more than doubled from 73 to 155. Demonstrators blocked roads and entry points to major cities and ports, impacting the transport of goods to the Panama Canal from Central American countries.
Government change in two of Latin America’s biggest economies has contributed to the increase in civil unrest. Supporters of the defeated incumbent Jair Bolsonaro blockaded roads and highways across 23 states in protest of the election results in Brazil. This led to a 33% increase in protests and riots in Brazil from 916 to 1,215.
Peru experienced a wave of protests led by left-wing groups and indigenous communities since December 2022 following the ousting of President Pedro Castillo with a 67% rise in incidents of civil unrest from 261 to 436.
Strikes Riots and Civil Commotion (SRCC) insurance provides coverage to businesses that have sustained losses from damage caused by riots, protests or other forms of unrest. Additionally, provides coverage for losses arising from interruption to business resulting from highways or roads being blockaded due to protests and riots.
Following a steady rise in civil unrest since the Global Financial Crisis, insurers have increasingly excluded coverage for damage from strikes, riots and civil commotion from standard insurance policies. Consequently leading to a demand for standalone policies to cover risk. However, even within the specialist SRCC market, risk appetite has moderated, leading some insurers to limit the risks that they cover, particularly in traditionally more politically volatile regions.
Gabriel Mayorga, Political Violence Underwriter at Chaucer, commented, “Rising inflation coupled with the lingering aftereffects of Covid-19 on the global economy has created a perfect storm. People who have struggled as a result of high food and energy costs have taken to the streets in protest. Countries such as Chile and Peru have also experienced considerable political instability, with sharp swings between left and right-wing governments in recent years giving rise to protests.
“Large loss events, such as the protests in Chile between 2019 and 2022 which caused $3bn in damage has reminded corporates of the need for this kind of coverage and the integral role insurance plays in helping businesses get back on their feet following distruption.”
