Hanbury: ‘PVT market must reassess relevance of traditional terrorism cover’

Charlie Hanbury, CEO of Samphire Risk, reflects on the evolving political violence and terrorism (PVT) insurance market and where judgment still outpaces data.

The past half-decade has seen the PVT insurance market develop rapidly, with major claims events and geopolitical shocks – including civil unrest in Chile, the invasion of Ukraine, and ongoing instability in the Middle East – helping shape the line’s identity.

But for Charlie Hanbury, the Chief Executive of Samphire Risk, a London market managing general agent focused on malicious risks, from kidnap and ransom to terrorism, this is still very much a market in flux.

“The increasing maturity of the market is probably best encapsulated in the broad exposure to – and understanding of – the various coverages,” Hanbury said, “and that PV solutions are now a commonly accepted part of the risk management discussion for clients.”

He sees the market’s relevance confirmed by a backdrop of constant instability yet warns that product development still lags behind where it needs to be.

“The events you mention and the news we see almost every day provide the background ‘hum’ of why they have been and remain very relevant insurance purchases,” he said.

“But compared to the property and casualty markets writ-large, there is a long way to go in terms of testing the products via claims; the approach to understanding pricing adequacy; and frankly, too, whether elements of the PV library of cover – pure terrorism insurance, in particular – are actually fit for purpose for the modern risk environment.”

Hanbury argues that recent trends in political violence have become more personal and less property-driven – a challenge for an insurance sector more attuned to underwriting damage than people.

“This is an environment that has seen a clear trend of low sophistication but high impact attacks on people and not property,” he said. “Is the PV market reacting quick enough to these risks and does it really understand a more human and potentially liability-driven exposure over the usual physical damage or business interruption focus?”

Knowledge over models

With less historical precedent, or data, to rely on, underwriting PVT still leans heavily on specialist insights, rather than actuarial science and modelling tools. Hanbury believes that is unlikely to change in the short to medium term.

“Data and analytics tend to have most relevance where historical information is plentiful, particularly in terms of attrition and severe losses,” he said.

“The PV market has faced challenges in terms of losses, particularly in recent years, but it is hard to argue that the data of the past is significant enough to give clues to the future.”

For now, he sees success in the market depending more on the instincts and curiosity of underwriters than on algorithms.

“Curiosity, knowledge and expert judgement are so valuable in this space because it is those who are most informed about localised, regional and international geopolitical issues, or security threats, that stand the best chance of not exposing their balance sheets to exposure.”

Hanbury cited Russia’s full-scale invasion of Ukraine in February 2022 as a clear example of this.

“The invasion of Ukraine by Russia was not foreseen by ‘data’, or indeed by many experts,” he said, “but those that were educated enough on the region and the history may well have made a judgement call to stay away – at the expense of those who did not have this expert opinion.”