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Civil disorder insurance coverage tightens as incidents rise


Over the past few years, the commercial insurance market for strike, riot and civil commotion coverage has undergone significant structural changes.

Rising losses from protests and political violence have triggered a surge in interest among policyholders, prompting them to review their existing coverages and limits, insurers and brokers say.

Although the coverage was previously available through all risk policies, reduced limits and exclusions have led to more risk managers accessing coverage through terrorism and other specialty policies, they say.

“It’s on the agenda like I’ve never seen before,” said Srdjan Todorovic, London-based head of political violence and hostile environment solutions for Allianz Global Corporate & Specialty, a unit of Allianz SE.

“Whether they have it within their property program or within a standalone terrorism and political violence policy, either way clients are reviewing what coverage they have in this area and potential limitations. We have seen a number of inquiries for higher limits around this coverage,” Fergus Critchley, New York-based head of crisis management North America at Willis Towers Watson PLC, said in an email.

In a report issued last week, AGCS highlighted large losses related to the line of coverage, with more than $2 billion in insured losses after unrest in the U.S. following the murder of George Floyd by a Minneapolis police officer in 2020.

Jeff Buyze, Fort Lauderdale, Florida-based vice president, national property practice leader, at USI Insurance Services LLC, said the brokerage has had clients asking more about strike, riot and civil commotion coverage, in some cases “because they’ve had instances” of potential gaps or shortfalls in coverage. One municipal client was advised of issues and challenges faced by municipalities and decided to purchase the coverage, he said. 

Typically, “we see patterns in classes of business and what one client will want can be similar to the rest as the needs and exposures are the same, and it becomes a solution for that entire class,” Mr. Buyze said.

One solution to lack of coverage in other policies is to access strike, riot and civil commotion coverage through a terrorism and political violence policy with elements of the coverage, sources said.

“In the past, political violence was not a peril many clients looked to buy for the U.S., but now to get the SRCC cover, you have to buy terrorism-political violence,” said Tarique Nageer, terrorism placement and advisory practice leader for Marsh USA Inc. in New York.

Mr. Nageer said after the violent protests that followed George Floyd’s murder, “there was a knee-jerk reaction from some insurers to put conditions on policies and limit what they would offer for SRCC” in all risk policies. Subsequently, there was a similarly abrupt reaction back to previous policy terms and conditions, he said.

Some restrictions have persisted, said Jen Rubin, New York-based senior underwriting executive and head of war and terrorism at Liberty Specialty Markets, a unit of Liberty Mutual Insurance Co. “On certain accounts with high inventory exposure, retail specifically, carriers are carefully reviewing the risk more than they did pre-summer of 2020.”

At the Jan. 1 reinsurance renewals, property reinsurers started introducing different terms and conditions to insurers offering terrorism and war coverage, and thus strike, riot and civil commotion coverage, Mr. Nageer said.

In recent insurance renewals, policyholders faced different terms and pricing on the coverage as a result of the move by reinsurers, he said.

“The reinsurance market has passed down restrictions in the hours clause per incident and these time periods are making their way into forms,” Ms. Rubin said of time limits and definitions of incidents in policy language.

The frequency of incidents and resulting market pressures are not expected to abate, with the AGCS report noting multibillion-dollar losses in Latin America, Europe, and North America over the past three years, and that the tensions leading to the losses have not abated.

“In recent years, SRCC events in Hong Kong, Chile, South Africa, and the U.S.A. have impacted reinsurance treaties, and the standalone terrorism and political violence markets are underwriting this coverage with much stricter guidelines on coverage scope,” Mr. Critchley said. 

Mr. Nageer noted that the U.S has an upcoming potentially contentious presidential election next year and that the events of Jan. 6, 2021, in the U.S. Capitol have not entirely emerged from scrutiny, adding additional layers of uncertainty and concerns about potential resulting exposures in the U.S.