Political violence insurance sees historic reset: Howden

Underlying grievances tied to inequality, the cost of living crisis and broader disenfranchisement, combined with the lasting economic effects of COVID-19 and Russia’s invasion of Ukraine, have elevated risks associated with strikes, riots and civil commotion (SRCC) and caused a historic reset in the standalone political violence (PV) insurance market, according to a new report by  Howden.

Recent outbreaks of violence in Chile, the US, South Africa and Peru reflect a highly dynamic and interconnected risk landscape. These events saw violence spiral quickly to affect multiple locations and are indicative of rising discontent globally, as demonstrated by other incidents of unrest last year in Iran, Kazakhstan, Sri Lanka and Argentina. 2023 has offered little respite, with protests in France and Israel hitting the headlines in recent weeks, the report notes.

All of which has reset insurers’ views of risk, Howden suggests. Property insurers are increasingly withdrawing SRCC coverage whilst risk appetite in the standalone market has reduced significantly. The fallout represents something akin to a perfect storm – demand up, supply down, triple-digit loss ratios and reinsurance retrenchment – resulting in a market-changing pricing correction.

Market pressures have been compounded further by the war in Ukraine, which in addition to causing one of the largest PV losses ever, has also exacerbated cost of living pressures and exposed other geopolitical risks that currently extend to rising tensions between China and the United States.

Conditions have unquestionably become more difficult, but few areas of re/insurance have such an innate ability to respond to a rapidly changing threat landscape. The step-change in losses and demand will require the market to scale up considerably over the next few years, the report notes.

As well as being another billion dollar plus event – current estimates suggest the war in Ukraine will become the biggest PV loss since the standalone market was born 20 plus years ago – the crisis has aggravated an already hostile SRCC backdrop.

Tom Bradbrook, executive director, Howden Specialty, said: “Such devastating losses have precipitated a correction in the PV market that looks set to persist for some time to come. Clients can therefore expect to continue to encounter difficult market conditions in 2023. For the cover that is most sought after currently – namely SRCC and full PV – line sizes are being cut across the board and certain risks are difficult to place, especially in more volatile areas. Rates are up for all perils and territories, with our pricing index showing an average increase of 80% since 2018.

“Now more than ever, risk transfer advice can make a crucial difference to renewal outcomes. With little prospect of a let up in market conditions, sector expertise, market-leading thought leadership and unrivalled relationships with insurers have never been more important. Howden’s PV team provides all this and more and we look forward to supporting clients in managing change and securing the best coverage available in the marketplace.”

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