Data analytics and technology provider Verisk has released a first-of-its-kind catastrophe model to help quantify the financial impacts of strikes, riots and civil commotion (SRCC) in the United States in response to escalating insurance losses from large-scale civil unrest events recently.
The Verisk SRCC Model for the U.S. can predict the severity of an event by evaluating the key drivers of risk, including social and economic trends, political factors and historical protest patterns. Effectively, the model can provide insight for exposure management and catastrophe modelling teams.
The model combines almost four decades of Verisk’s Extreme Event Solutions’ catastrophe modelling with over 15 years of experience from its global risks business, Verisk Maplecroft, in quantifying political violence.
Since 2010, strikes, riots, and civil commotion events have caused insured losses of over $10 billion globally, compared to less than $1 billion for terrorism. In the last six years, insurers have faced five events causing over $1 billion in global insured losses each, while in the U.S. alone have reached approximately $3 billion.
The new model is available through Verisk’s Extreme Events Solutions’ Touchstone platform. It can estimate potential insured losses from SRCC events and quantify the potential financial impact of risk for individual locations and at the enterprise level, and can create robust underwriting guidelines to specifically account for associated business interruption.
It can assess tail risk through a catalogue of “stochastic” events which feature scenarios that are inherently plausible, but far worse than anything seen historically. It can also address risk management and regulatory requirements by stress testing extreme disaster scenarios to check for potential vulnerabilities.
Sam Haynes, Vice President of Data and Analytics, Verisk Maplecroft, commented, “Over recent years, unrest in the U.S. highlighted the necessity for insurers to have a comprehensive understanding of potential political risk hazards. A 1 in 1,000-year SRCC event could cause losses 10 times greater than those from the 2020 protests, while very low-probability SRCC tail events could potentially impact commercial and municipal properties at the ZIP code level nationwide, the majority of which are located in metropolitan areas.”
Shane Latchman, Managing Director of Verisk Extreme Event Solutions team in London, added, “Verisk’s goal is to empower insurers covering political violence and terrorism risks to enhance their underwriting strategies through insights on the riskiness of exposures. This will facilitate informed decisions on insurance pricing, capital allocation, risk management and mitigation. Ultimately, this SRCC Model enables underwriters to balance risk and premium effectively and allow insurers to effectively model this risk.”
