(Re)insurance broking group Gallagher’s new report highlights the necessity for businesses and communities to adopt proactive risk management strategies, in light of global uncertainties in 2024.
The year is marked by the potential for civil unrest, terrorism, and political violence due to upcoming elections worldwide.
In the UK, environmental activism has caused significant disruptions, targeting essential assets and resulting in economic losses. Concurrently, the cost of living crisis has led to a rise in crime, notably shoplifting and fraud, highlighting the urgent need for effective risk management.
Governments have introduced new laws to combat public disorder and terrorism, increasing the demand for crisis management services and political violence insurance. However, insurers are increasingly cautious about covering risks related to strikes, riots, and civil commotion (SRCC).
Traditionally, SRCC insurance covers property damage and business interruptions caused by efforts to disturb the peace. Despite its continued inclusion in UK property policies, there is a global reduction in insurer appetite for political violence risks.
Insurers are reassessing recent losses and the potential systemic nature of future events, leading to possible exclusions or heightened restrictions on SRCC and terrorism coverage.
Reinsurance companies are also limiting or excluding SRCC coverage in property insurance treaties, further pressuring all-risk programmes and stand-alone political violence insurance. In response, companies are exploring alternative risk transfer options.
Captives, for example, offer a flexible way to manage difficult-to-insure risks by pooling resources to cover losses, allowing businesses to tailor coverage to their specific needs. This approach has gained interest from clients seeking to fill gaps in political violence coverage as the market evolves.
Additionally, parametric insurance is gaining traction for addressing gaps in coverage related to natural catastrophes and disruptions caused by local disorder or violence. This trigger-led product is increasingly seen as a viable solution for managing such risks.
Elections are closely tied to social unrest, with the upcoming US election in November poised to significantly impact the global landscape. The storming of the Capitol Hill building in response to the 2020 election result, which caused an estimated USD 1.5 million in damages, underscores this potential.
The forthcoming election could shift protests from campuses to streets, with the potential for unrest in the US to spill over into the UK. The UK is already dealing with increased crime and social unrest ahead of its own election in July 2024.
Moreover, a potential reduction in US support for Ukraine could embolden aggressors like Vladimir Putin, raising the likelihood of conflict in Europe, particularly in tension-prone areas such as Kosovo and Serbia, where Russian influence is significant and elections are forthcoming.
