The Big Question: How has the market reacted to the threat of terrorism and political violence?

The threat of terrorism and political violence is at a level that we have not seen in over 40 years. The first major European land war since the end of the second world war continues in Ukraine and the Israeli – Gaza conflict threatens to broaden into a regional crisis. The ongoing attacks in the Red Sea have severely impacted the world’s supply chains and with it created further instability in a number of countries.

The threat of terrorism remains acute and the threat level in many western nations remains high. The risks the world faces have changed with the major events which caused catastrophic property loss having reduced with now more focused attacks by small groups of lone wolf attackers which seek to attack populations in high density areas.

London remains a global leader in the provision of terrorism and political violence insurance and the rise in the level of violent protest and demonstrations has led to some traditional products in a number of classes looking to define their limits when violence becomes terrorism. It has led to the need for the terrorism market to redefine coverage terms and pricing.

Ian Summers, Global Business Development Leader, AdvantageGo

Chloe Gordge newly appointed Head of Terrorism in London, at Markel says the terrorism market has undergone a process of maturity and price correction in recent years, against a backdrop of heightened risks.

“The market has seen a degree of hardening,” she adds. “We have seen larger scale political violence events.”

The world has seen country specific protests in recent years such as those in Chile and broader multi-national and multi-regional protests such as the Black Lives Matter protests which began in the United States but spread across the world.

The rising risks have seen a shift in appetite by property underwriters with many looking to reduce strike, riot and civil commotion exposures leaving a gap that terrorism underwriters have stepped in to fill.

“Some SRCC markets have begun to exit the coverage after some difficult claims experiences,” Gordge explains. “In the past two to three years we have seen a reduced capacity for such risks but the demand has remained.”

She adds that the world remains geopolitically unstable and the market has been working on the products it offers.

“We have seen the market look at the terms and conditions contained in policies and ensuring that the risks are priced appropriately,” says Gordge. “Placement methods have also been scrutinised.”

Gordge said the COVID pandemic had highlighted the impact that a single event can have on the wider risk market and has added greater emphasis on the need for the market to accurately price its risks.

“In recent years our clients’ risks have increased. We have also seen a rise in submissions volumes and clients look to ensure they have adequate coverage.

“This year we have seen greater geopolitical risks and 2024 will be historic in the fact that more people across the world will vote in elections than at any other time. That brings with it the potential for protests. We have already seen protests in Pakistan over the outcome of the elections and in Senegal due to delays in its elections. South Africa, and the USA have elections this year where there is the potential for violent protest.

“We also have the increasing risk of violence due to the ongoing wars in Europe and the Middle East and we have seen protests which have become increasingly hostile.”

The conflict in the Middle East and Ukraine have impacted other areas of the world.

The supply chain issues which saw the inability for grain to be exported from Ukraine impacted a number of countries which rely on grain imports for vital food supplies which has the potential to cause unrest and protests.”

Gordge adds: “The way in which the products are structured has changed with the changing terrorism threats our clients face. There has always been a strong property damage element to the cover and that remains. However we have to reflect the risks that clients face, such as loss of attraction if their business is in an area which has suffered a terrorist attack, denial of access.”

The risks in the number of attacks which have seen lone or multiple assailants attack hospitality areas has changed the risks but Gordge says the market has been able to react and the coverages that are required can be accessed by clients. Insurers are also looking at ways in which they can innovate to create new products.

“The terrorism market has been asked to change its approach and we have sought to react” she explains. “The rise in the need for cover for what would have fallen in the past under property products has left a gap and it is one that terrorism underwriters have been asked to fill. It is an opportunity for the market. We have to respond to the need for SRCC and war risks from our clients”.

She adds: “I take up my new role at a very exciting time for the market.  I have spent 12 years in the political violence classes and it is a very dynamic place to be. We still do not know what we will be asked to cover day to day. It remains such a fluid peril.

“As insurers we have the responsibility to provide clients with the cover that is suitable for their risks and to manage any claims quickly and efficiently. We also need to provide a good service to our brokers and with that deliver innovative solutions.

“It is all too often the last part of the programme which is placed so we need to have the ability to react and respond quickly, while ensuring that we have a profitable book of business. At the heart of what we do we have to ensure that the product and price we charge is sustainable for the long term.”