The political violence insurance market, which covers businesses against damage caused by strikes, riots and civil commotion, is bracing itself for further strife after July\u2019s riots and looting in South Africa, as the uneasy truce created by the pandemic begins to fray in countries where discontent has simmered since violent demonstrations erupted in 2018 and 2019.<\/p>\n
Disorder has picked up again as controls are lifted. Lockdowns imposed to contain the pandemic helped governments put a lid on rolling waves of popular protests. But the causes of the unrest that made 2019 a record-breaking year for political violence remain: poverty, inequality, widespread feelings of social marginalisation and political alienation.<\/p>\n
If anything, the pandemic has intensified these grievances, as well as creating a few more for good measure, believes Claudine Fry, principal of global risks analysis at Control Risks. <\/p>\n
\u201cCovid-19 has become a focus for some anti-government, civil liberties and conspiracy groups, while the methods used to contain and manage the pandemic are a trigger for protests and unrest. It has weakened government authority in some countries and created new sources of conflict,\u201d Fry said.<\/p>\n
\u201cThe situation is very volatile,\u201d said Richard Halstead, line underwriter for war, terrorism and political violence at Hiscox London Market. \u201cCovid will increase the risk of political violence further, against a backdrop of increasing geopolitical risk over the past decade.\u201d <\/p>\n
Chris Kirby, global head of political violence and terrorism at specialty MGA Optio, is expecting \u201ca protracted period of civil unrest globally\u201d. New environmental and anti-capitalist movements are likely to further fan the simmering resentments, while social media is also playing a big part, he added. \u201cPeople are able to communicate and launch different movements much more easily. This brings a new dynamic.\u201d<\/p>\n
Democracy in crisis<\/strong> A spontaneous wave of protests in countries across the world from Algeria to Bolivia, the US to France and Hong Kong in the past three years has led to rising political violence insurance claims that \u201chave tested the risk appetite of many carriers\u201d, said Kirby. \u201cFor some markets, the riots in South Africa were the first sustained losses they\u2019d had in 20 years and that can be quite unnerving for markets that write \u2018benign\u2019 books and would not expect attritional losses.\u201d<\/p>\n That political violence underwriters are faced with a steady stream of claims is evidence of how the market has \u201cnow come of age\u201d, said Halstead.<\/p>\n But July\u2019s rioting in South Africa, in which 200 people died in the worst civil unrest in the country since the end of apartheid, has resulted in heavy claims on the political violence market, with certain Lloyd\u2019s syndicates particularly hard hit. <\/p>\n South African riots cause huge loss<\/strong> That will create \u201cdifferences within the political violence market that will challenge underwriters\u201d, Halstead said. Some players will be nursing big claims, others will be relatively lightly affected, while some will be completely unscathed, he explained. <\/p>\n Overall, the market is strong though, said Kirby. \u201cThere is sufficient capacity and appetite to get most business placed. New players coming in with large line sizes are going to bring a new dynamic, which will benefit the buyers but will be a double-edged sword for brokers and the existing markets.\u201d<\/p>\n The big South African loss has helped to temper the increasing competition, however, said Halstead. \u201cOur worry was that the new capacity coming in could push rating down again, but we\u2019ve seen discipline maintained as a result of South Africa.\u201d While rates are largely flat, there are wild fluctuations in countries where there have been losses. Prices in Chile are under pressure, but \u201cthat\u2019s because the rates there were at a very high level following the losses in 2019\u201d, whereas on \u201ccertain South African business, rates have gone up tenfold\u201d, Halstead explained.<\/p>\n The next shoe to drop<\/strong> \u201cWe closely monitor many countries to better understand which should be on the shortlist. But that shortlist is a pretty long list now,\u201d admitted Halstead. In states where conditions are like a tinderbox, it only takes a small spark to ignite conflict \u2013 the jailing of a disgraced but still-popular politician, a public transport fare rise and fuel price hikes triggered demonstrations and violence in South Africa, Chile and Haiti respectively. <\/p>\n \u201cWe have realised as a market that the threat of SRCC or terrorism are as likely now in a major western city as they are in a major African or Asian city,\u201d argued Kirby. \u201cThe variables are the effectiveness of first responders and security, the cost of repairs or cleanup, and the availability of materials to get a location up and running to minimise loss of revenue. Yet the spread of the base rate applicable to different countries has narrowed and rating is now more comprehensive than ever before.\u201d<\/p>\n Control Risks\u2019 Fry said: \u201cCountries we are watching closely this year include many of those that experienced unrest in 2019, including Chile, Lebanon and France, as well as Thailand, Belarus, Colombia and Brazil.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" The political violence insurance market, which covers businesses against damage caused by strikes, riots and civil commotion, is bracing itself for further strife after July\u2019s riots and looting in South Africa, as the uneasy truce created by the pandemic begins to fray in countries where discontent has simmered since violent 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\nEven before the pandemic struck, global dissatisfaction with democracy was already at a record high, according to a report published last year by Cambridge University\u2019s Centre for the Future of Democracy. Many large democracies \u2013 including the US, UK, Brazil, Mexico, South Africa, Colombia, and Australia \u2013 were witnessing their highest levels of civic discontent since the 1990s, while others, like Japan, Greece and Spain, were close to all-time highs, the report stated.<\/p>\n
\nSasria, the state-owned South African insurer that covers domestic strikes, riots and civil commotion (SRCC) claims, has said its bill from the rioting will be ZAR32bn ($2.2bn), but that all claims settled above Sasria limits, along with uninsured losses, would total ZAR50bn ($3.5bn), making it the biggest insured riot loss on record, higher even than the Chilean riots and the US Black Lives Matter disorder, it said. Sasria is reinsured by the Lloyd\u2019s market, while business interruption risks not covered by the state insurer are also placed there. <\/p>\n
\nThe question everyone is now asking is: where will violence flare next? \u201cWhile there will always be a degree of unpredictability to outbreaks of unrest, there are persistent signs that political risk is rising,\u201d said Fry. Control Risks uses several indicators to gauge the threat level, including a country\u2019s inflation rate, its level of political activism and local protest groups\u2019 capability to foment disorder along with its government\u2019s popularity and legitimacy, as well as keeping close tabs on any specific events that could trigger unrest. <\/p>\n