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Editorial: The business interruption implications of burgeoning civil commotion

Editorial: The business interruption implications of burgeoning civil commotion | Insurance Business UK

Editorial: The business interruption implications of burgeoning civil commotion

As far back as October 2020, the question of whether civil discontent implications might arise from continued COVID-19 restrictions was being evaluated by insurance professionals. It’s the best part of 10 months later but that conversation remains as relevant as ever.

The implication of civil commotions has been in the headlines a lot lately. Only earlier this week, it was revealed that days of violent riots across South Africa had caused billions of rand in damage and could have significant ramifications for insurers.  

Read more: South Africa’s riots insurer in spotlight after days of carnage

The shockwaves of politically or socially motivated riots, strikes or civil commotion are far-reaching and significant, and they resonate across a nation long after the initial furore has died down. While Marsh’s Political Risk Map 2021 placed the UK with a ranking of 4.3 out of 10.0 for ‘Strikes, Riots & Civil Commotion’, down 0.2 from last year, the global broker and risk manager highlighted that the COVID crisis is fuelling social inequality and political unrest.

This is set against an evolving backdrop of protests, which is not linked just to COVID, as shown by a report from Chaucer that highlighted that the number of large protests and demonstrations has spiked 36% since the Global Financial Crisis of 2008-2009. The rise in such protests was particularly notable in Europe, where the number of such incidents grew 71%, from an average of 92 per year between 2000 and 2009 to 157 between 2010 and 2019.

Between the Black Lives Matter protests, the Extinction Rebellion movement and conflict arising from COVID restrictions, the UK has had a taste of what this unrest looks like. And now ‘Freedom Day’ has arrived in the UK, a moniker that feels more than faintly ironic when the day itself was marked by widespread protests. And the latest data released by SAGE is that daily new infections are expected to reach at least 100,000 sometime in Q3 2021.

If people are already protesting because ‘Freedom Day’ doesn’t look very much like the promise that kept many obedient to the boundaries of the third national lockdown, then it’s not a stretch to believe that these scenes are but the tip of an iceberg should another shutdown be ordained.

This represents particular difficulty for insurance businesses. After all, who wants the role of a doomsday prophet, always warning about risks that may or may not occur? To work in insurance requires a little of this Cassandra-like quality, of course, but I have little doubt it might seem counter-intuitive to further muddy the waters of client discussions at a time when finding coverage for clear and present dangers is hard enough.

But looking to the example of South Africa’s recent turmoil, despite the state-sponsored safety net of Sasria, private P&C insurers may yet find that they still have exposure while business interruption policies could be changed due to supply-chain disruption, lost production and store closures. Business interruption has recently proven it remains a very fresh blow to the psyche of the insurance sector. And the news that multiple high-profile hospitality groups are making BI claims has proven that Pandora’s box was not tightly sealed by the Supreme Court’s business interruption test case ruling.

Read more: Stonegate makes £845 million claim against three major insurers

Whether it’s around business interruption, or environmental activism, or the rising concerns around the implications of COVID on professional indemnity and legal expenses insurance, the insurance profession and all adjacent to it have been taught a valuable lesson over the last 16 months – what you don’t know really can hurt you. Political instability belongs firmly to the ranks of these considerations and as such, simply cannot be put to one side to make way for more immediate concerns.

Now is the time for insurance brokers to double-check the policy coverage of their clients for any exclusions or limits that might prove prohibitive in a worst-case scenario. Now is the time for in-depth conversations, akin to those promoted by the CII and BIBA which centre around confirming that your clients genuinely understand the remit of the policy you have prepared for them. It is time for those tough conversations which are the inevitable result of a hard market and a tumultuous socio-political landscape colliding.  

Brokers are in a strong position to also hold frank and meaningful conversations with the insurer partners with whom they developed strong relationships in softer market conditions. By capitalising on these relationships and the information that many seem genuinely willing to share with the market, brokers can be prepped to field any and all of their clients’ concerns come renewals time.

The good news is that with these conversations out of the way, you and your clients can edge a little closer to that peace of mind which is the overall aim and ambition of all insurance services. And while COVID has largely taken on the role of an armchair psychologist telling us only what we already knew or would rather not know about ourselves, there have been some valuable insights from the crisis – and high up on that list is the sanctity of peace of mind.