The rise in social unrest incidents globally is being driven by various factors, including increasing political polarization and economic inequality, both fueled by cost-of-living crises. Between 2017 and 2022, more than 100 countries witnessed 440 significant anti-government protests, reflecting a fourfold increase over that period with an average annual rise of 35% in occurrences. These statistics were calculated based on data extracted from the Protest Tracker of the Carnegie Endowment for International Peace.[1]
Moreover, this escalation is not just in frequency but also in intensity. Property Claim Services (PCS) data reveals that before 2019, only the Rodney King riots in Los Angeles in 1992 had surpassed the US$1 billion-threshold in today's currency for property damage. However, since then, three events have exceeded this level in today's dollars. This includes the Black Lives Matter (BLM) protests in the United States during 2020, which caused more than US$2 billion worth of industry losses; the riots in Chile in 2019, and in South Africa in 2021, which both exceeded US$3 billion.
With political violence on the rise, some property insurers now limit or outright exclude civil unrest coverage, more commonly known as ‘strikes, riots and civil commotion’ or (SRCC). While some specialist insurers are offering political violence coverage to fill the gap, global organizations are well-advised to adopt a proactive approach to reduce their vulnerability and navigate coverage uncertainties.
In this insight, we will explore strategies for your organization to address the effects of increasing incidents, costs, and coverage gaps.
Specifically, we explore:
In recent years, higher-income nations have witnessed a rise in political violence, with more intense civil unrest incidents in major cities across Western Europe and the United States. Examples include France's Gilets Jaunes protests, the U.S. Black Lives Matter (BLM) protests, and the recent Israeli protests of proposed judicial reforms.
Meanwhile, in developing countries, a mixture of grievances over rising living costs, food insecurity, unemployment, reversals in press freedom and other methods to channel discontent, have seen incidents and ongoing threat of social unrest in countries such as Iran, Peru, South Africa and Sri Lanka.
While specialist insurers are offering SRCC coverage, they face scrutiny from reinsurers concerned about nationwide commotion. The recent SRCC uptick is prompting insurers to reconsider their assessments of SRCC as a low-probability, high-severity risk. Regardless of their stance on probability and severity of incidents, insurers are working to enhance aggregation and modeling, driven by Lloyd's and reinsurers' mandates, managing risks to meet industry expectations. In the short term, this means a hardening market and greater scrutiny of organizations' risk profiles.
Analyzing SRCC is complex due to its unpredictability. Unlike traditional climate models, SRCC risk does not follow consistent historical loss patterns. Moreover, SRCC losses have a multitude of indirect impacts that might be difficult to quantify, such as preemptive location closures, boarding-up storefronts, and deployment of additional security.
Yet, many of these challenges in quantifying SRCC risks can be addressed through analytics. For instance, by analyzing previous riots and employing mapping tools, analytics can potentially aid in defining the footprint for a social unrest incident. This, in turn, can augment insurers' comprehension of the risk and lead to enhanced accuracy in pricing. Furthermore, by leveraging analytics, you can also subsequently pinpoint vulnerable areas, give precedence to risk strategies, and provide valuable insights for risk transfer decisions.
Finally, analytics can also help you meet your duty of care to employees by providing a quantifiable risk management approach you can share with your stakeholders. This can help you plan to mitigate future risks and provide insurers with a more nuanced understanding of your risk, leading to more appropriate pricing of coverage.
Civil unrest presents an array of intricate risks to mitigate. These occurrences might single out your organization or industry, or you could experience collateral impact due to broader protest actions.
Regardless, the safety of your employees and integrity of assets can quickly be compromised. This means that alongside insurance solutions, your organization should demonstrate a level of duty of care to mitigate the risks and put you in a position to present your risk more positively to insurance markets.
We suggest several areas you can focus on to improve your organization’s resiliency to SRCC risks, including measures related to risk assessments and monitoring.
As a part of your routine risk assessments, you should assess your risk of SRCC. Monitoring local protest activity, or threat of, is equally important, particularly if you can establish continuing relationships with local law enforcement and other businesses in the local community. By making these connections and participating in open dialogue, you can benefit from information-sharing both in advance and during protest activity.
While this is particularly common in major cities (such as London and New York, where there are well-organized police and business sharing networks), you can develop these networks in any location. During live protests, you can use these types of forums alongside your own intelligence gathering, for example, monitoring social media, to stay on top of the movement and intentions of a protest group to inform taking necessary precautions and mitigation moves.
If it appears your operations, or a specific operation within your organization, is at higher risk of being impacted by an SRCC event, you should consider training within your response protocols. This may include briefs on corporate or site-specific response protocols, conducting drills, or training staff on personal security and the individual actions they should take if they find themselves caught up in an SRCC event.
You should also establish a set of contingency and response procedures, particularly for locations or critical assets that may be impacted by SRCC events. This can include some simple pre-determined measures, such as:
It’s also key to ensure you can provide local employees with effective, quick and regular updates on protest activity that directly or indirectly impacts your operations and people, in particular providing opportunities for staff to alert if they are in difficulty or under threat. These communications systems can include well-maintained internal group email distributions, mass communications systems and call trees.
In times of political dissatisfaction and economic austerity, organizations across the globe are likely to face the risk of social unrest. We might also expect the impact of climate change and increasing demand on finite resources due to population growth to exacerbate global unrest.
The risk of civil unrest and political violence is an issue for organizations in both developed and developing countries alike, and is not expected to remain in just one region of the world. This means if you are not doing so already, you should consider analytical tools to help better understand and quantify your organization’s exposure to SRCC, as well as to better equip the business to present information on exposure to insurers.
Lastly, organizations should review their crisis management plans to validate that it is fit for purpose, and ready to respond and mitigate any potential event.
For smarter ways to manage the rise in civil unrest and political risk, get in touch.
