Recent political violence events worldwide have led to significant shifts in the political violence insurance marketplace, impacting rates, limits, and terms and conditions, according to a Marsh report.
The Russia-Ukraine war, tensions between Israel and Hamas, and global civil unrest have raised awareness of associated risks. In some territories, including Russia, Ukraine, Moldova, Belarus, Israel, and Taiwan, insurers are now unable or reluctant to offer cover due to sanction and treaty restrictions, the report noted.
Political violence incidents have occurred in various countries, highlighting the difficulty in foreseeing such risks. These events include nationwide strikes and protests in France, increased violence targeting public officials in the US, dissent in Iran following the death of Mahsa Amini, and ongoing conflicts in Syria.
The Institute for Economics and Peace’s 2023 Global Peace Index reports a year-on-year deterioration in global peacefulness, with Russia and the Eurasia region experiencing the largest regional decline. The global economic impact of violence was estimated at US$17.5 trillion in 2022, equivalent to 12.9% of global GDP, the report noted.
Global stability is predicted to further deteriorate, with the World Bank estimating that up to two-thirds of the world’s extreme poor could reside in settings of fragility, conflict, and violence by 2030.
In response to these events, global pricing for political violence insurance has surged, prompting clients to re-evaluate coverage limits and policy terms. Insurers are closely examining specific clauses, including contingent business interruption, and assessing socio-economic indicators influencing coverage conditions.
Treaty coverage for political violence and terrorism markets is under increased scrutiny in 2023, with property catastrophe treaties facing particular pressure. Reinsurers have imposed tightened terms and conditions on “all-risk” property policies, leading insurers to explore standalone covers for these perils. This has resulted in increased rates for terrorism and political violence reinsurance, impacting pricing for insureds.
The Russia-Ukraine war’s ripple effect on supply chains, food supplies, and energy costs, combined with global socio-economic protests, underscores the potential disruption and economic impact of political violence events. Organizations are urged to ensure robust business continuity and crisis plans, conduct scenario planning, and coordinate political violence and/or terrorism insurance with other relevant forms of coverage.
Being prepared for future events involves understanding the claims process and gathering necessary information for recovery. Working with advisors to build the right insurance program can enhance readiness to respond effectively.
As of November 3, 2023, the following countries are under sanctions: Afghanistan, Belarus, Cuba, Iran, North Korea, Russia, Syria, Russia-controlled regions in Ukraine, and Venezuela. Ongoing events in Israel continue to be monitored for potential impacts on the political violence and political risk market.
