Political violence insurance buyers urged to fight for well-defined perils

After being shunned by property insurers, terrorism and political violence covers have been embraced by specialty underwriters to the extent that even war risks can be covered in some situations. But insurance buyers must pay close attention to definitions of perils in policies that contain subjective and constantly evolving concepts. Experts at Rencontres de l’AMRAE stressed that the specialty market has been proactive in coming up with complementary clauses and write-ins that have expanded the range of risks linked to terrorism and political violence. But every extension has a cost and whether a claim will be paid or not may vary depending on how underwriters, judges or governments interpret particular loss events. “It will always remain a matter of interpretation, and we count on the good faith of our insurers,” said Anne-Marie Fournier, risk manager at luxury group Kering. Problems in France begin with a lack of definition for political violence perils in the French Insurance Code. As a result, claims payment can end up in the courts, which can make decisions that surprise policyholders. Pierre-Olivier Leblanc, a lawyer at Taylor Wessing in Paris, recalled a case in 1995 when a bomb was thrown at a high school in the Corsican city of Bastia. The judges decided that because the act was not claimed by any known terrorist group and was badly organised, it could not have been an act of terrorism. “We must think that it will be better that a terrorist leaves a business card, claims the attack, and, if possible, does a good job of it, otherwise a judge may decide that an attack cannot be qualified as terrorism,” said Leblanc. The panellists said that it is even worse if politicians or the media help define a loss event. Former US president Donald Trump qualified Black Lives Matter protesters as left wing terrorists, while his rivals applied similar adjectives to far right organisations that marched into the Capitol building. François Barriol, a senior underwriter at Liberty Specialty Markets, noted that the Brazilian government published a press release after the January invasion of government buildings in Brasilia that condemned acts of terrorism, vandalism and criminality, as well as a coup d’état. “Four categories of political violence were denounced at the same time,” he noted wryly. Sometimes loss events evolve as the days go by. Barriol explained that a revolution that brought down the Egyptian government of Hosni Moubarak in 2011 started as a social riot and civil commotion-like claim, evolved into a case of pure political violence, and peaked with a terror attack against a public building. Furthermore, analysts have already identified several waves of terrorism, such as anarchist, post-colonial, far left and religious, with ecoterrorism the latest to emerge. And cyber terrorism is another worry. “The definitions evolve and the insurance market must evolve with them,” Leblanc said. The experts urged risk managers to demand that covered and excluded perils are defined as precisely as possible. But even that may not be enough to guarantee a loss is paid. Sandrine Pierron-Loubens, an underwriter of war and terrorism risks at MS Amlin in Paris, pointed out that insurance buyers must be aware of the impact that terror pools can have on their terrorism and political violence policies. Very often, policies will exclude territories covered by such pools. She said that some pools, like GAREAT in France and Consórcio de Compensación de Seguros in Spain, are mandatory and well known. Others, like Pool Re in the UK and TRIA in the US, are well known but not mandatory. About 20 other countries have terrorism pools that are neither mandatory nor well known by risk managers. The problem is that exclusions often apply even in jurisdictions where the pools are not mandatory, which can result in a nasty surprise for policyholders when they make a claim.

Political violence insurance buyers urged to fight for well-defined perils

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