Strikes, riots and civil commotion exclusions set to widen

A tightening of terms and conditions in the reinsurance market is set to make things tricky for primary buyers during 2023, with exclusions for strikes, riot and civil commotion civil commotion (SRCC) and non-damage business interruption on the cards. A major adjustment in the property reinsurance market at 1 January renewal has left insurers paying more for less reinsurance. Property reinsurance rates increased significantly, while many insurers faced higher retentions and attachment points. Reinsurers also sought to narrow terms and conditions, in particular around natural catastrophes, non-damage business interruption coverage and SRCC in property contracts, as well as war cover in specialty lines like marine and aviation. Some of these changes to reinsurance terms are now filtering down to primary covers, Clarissa Franks told Commercial Risk Europe. Franks, who is UK placement lead for risk management, corporate and commercial businesses, at Marsh, said SRCC exclusions in particular are likely to become more prevalent in commercial insurance contracts going forward. “For terrorism, strikes, riots and civil commotion, in some instances there have been wide territory exclusions and even an increased prevalence of global exclusions. Unfortunately for commercial insurance buyers, the terrorism and political violence market has also tightened… and it may not be possible to replicate the same SRCC cover and level of capacity in the terrorism market,” warned Franks. The reinsurance market has also sought to exclude non-damage business interruption cover from property policies, driven in part by Covid-19 losses in territories like the UK. Insurers may still be willing to offer non-damage BI extensions on a net capacity basis, but they will lack aggregate reinsurance covers for these risks, said Franks. “This is really frustrating for global insurance buyers and something we will push hard on because it is an area of important emerging risk for supply chains,” she said. Reinsurers also sought to move away from all-risk to named peril covers after suffering large losses in recent years from so-called secondary perils like hail storms, winter storms and floods. In addition, reinsurers have reduced hours clauses in reinsurance contracts that dictate the period of indemnification for an event, such as a storm or periods of social unrest. While insurers will continue to offer cover for natural catastrophes, they could try to introduce sub-limits for certain perils in specific territories, such as UK flood, Franks said. But she is optimistic that changes to terms and conditions at reinsurance level will have a limited impact on commercial insurance coverage because many restrictions were already present in primary policies. “The treaty market has caught up a little with the direct market and broadened exclusions in a way the direct market was already dealing with it. So I am hopeful we will not see significant changes or widespread exclusions, other than for SRCC,” said Franks.

Strikes, riots and civil commotion exclusions set to widen

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