Posted on 19 Apr 2011
Companies operating in politically volatile regions of the world may soon find they are unable to retain sufficient insurance coverage to protect their assets and staff, according to a new report by global insurance broker, Willis Group. These companies also run the risk of discovering that their existing policies may not necessarily cover the type of political unrest that is occurring in the Middle East, North Africa and Asia.
The report, entitled “Mind the Gap”, observes that insurers that currently offer protection against political risk and terrorism are re-evaluating the terms and prices of their policies to reflect the ongoing turmoil in the Middle East and heightened civil unrest unfolding in other regions of the world.
Willis says that it is as yet unclear whether insurer appetites or abilities going forward will become more restricted by the application of country or territory limits.
Commenting on the need for companies to get the right coverage in place in case insurers close the door, the report’s lead author Bob Peilow, Managing Director, Willis Global Solutions (International) said: “What shocks a lot of people about the latest wave of political unrest is the unpredictability around where it will happen next, and the fact that today’s stable or ‘investor friendly’ regime can very easily become tomorrow’s hot spot. This is why it is so important that companies have the right coverage in place should the unthinkable happen.”
Comparing the three main types of insurance against political unrest -Strikes, Riots and Civil Commotion (SRCC), Terrorism and Political Violence cover – the Willis report concludes that full Political Violence insurance will provide the most comprehensive coverage in response to the type of unrest currently sweeping through the Northern hemisphere.
Much broader than traditional terrorism insurance, political violence insurance protects against financial loss as the consequence of insurrection, civil unrest, politically motivated sabotage, strikes, riots and civil commotion, armed uprising, coup d’état, and civil war.
Willis says that in the past companies operating in hostile territories have generally purchased SRCC or Terrorism cover as extensions to their Property insurance and other policies. However, the broker warns that the populous violence aimed at overthrowing unpopular regimes witnessed this year would not be covered by a stand-alone Terrorism insurance policy.
Willis advises that companies concerned with supply chain risk could consider alternative options to Political Violence cover including Trade Disruption Insurance, which can cover importers’ loss of profits or revenue resulting from an import embargo, war, port blockage, supplier insolvency, or confiscation of goods. In some instances, Marine Cargo insurance can also be extended to cover the risks of strikes, riots and other acts of civil unrest.
Coverage is also available for the evacuation of staff under most corporate Kidnap & Ransom insurance policies which include a little-known Emergency
Political Evacuation and Relocation extension. Some coverage for this type of risk is also afforded under group Personal Accident and Business Travel policies, though the scope of coverage varies considerably and is typically focused on business travellers versus expatriate staff, said Willis.
Commenting on the report, Willis Group President, Grahame Millwater said: “Exposure to political unrest will only grow as global business continues to expand into new and often hostile territories where the threat of resource nationalism, creeping expropriation and supply chain vulnerability is increasing. Our message to companies around the world is to use their brokers to navigate the insurance options available for these risks and to identify any potential gaps in their coverage.”