In an increasingly volatile global landscape, businesses face many risks beyond the traditional concerns of market fluctuations and natural disasters. One of the most pressing and unpredictable threats is political violence. From civil unrest and riots to acts of terrorism and war, the impact of political violence can be devastating, leading to significant financial losses, operational disruptions, and long-term reputational damage. As a Reinsurance Broking firm, we understand the critical need for robust political violence Reinsurance solutions to protect our clients’ interests in these uncertain times. I have witnessed first-hand the profound impact that global incidents have on the Insurance landscape. The unpredictable nature of political violence means that businesses must constantly adapt to new risks.

Understanding Political Violence Risks

Political violence encompasses a range of hostile events, including:

• Civil Commotion and Riots: Public disturbances causing damage to property and interruption of business operations.
• Terrorism: Acts intended to cause mass destruction, instill fear, and disrupt economic stability.
• Insurrection and Revolution: Uprisings that can lead to significant political and social upheaval, often resulting in widespread damage.
• War and Civil War: Large-scale conflicts with profound impacts on businesses and economies.

These events are often unpredictable and can escalate rapidly, leaving businesses vulnerable to substantial losses. Traditional insurance policies may not fully address these unique risks, making political violence reinsurance a vital component of a comprehensive risk management strategy.

Real-World Impacts on Political Violence Reinsurance

Political violence reinsurance capacity and market conditions are significantly influenced by real-world incidents. Here are some notable examples:

• 9/11 Terrorist Attacks: The terrorist attacks on September 11, 2001, had a profound impact on the global insurance and reinsurance markets. The unprecedented scale of the losses led to a sharp increase in demand for terrorism insurance and reinsurance. Lloyds of London, one of the world’s leading insurance markets, faced substantial claims, prompting a re-evaluation of risk assessment and pricing for political violence and terrorism coverage. The event led to the creation of government-backed insurance pools, such as the Terrorism Risk Insurance Act (TRIA) in the United States, to stabilise the market.

• Arab Spring (2010-2012): The wave of protests and uprisings across the Middle East and North Africa caused significant disruptions and property damage. Insurers and reinsurers experienced a surge in claims related to political violence. This period highlighted the need for more comprehensive and flexible reinsurance solutions to cover the diverse risks associated with civil commotion and revolution. Lloyds responded by enhancing its risk modelling and adjusting its capacity to better serve affected regions.

• Paris and Brussels Attacks (2015-2016): The coordinated terrorist attacks in Paris and Brussels resulted in substantial insured losses and heightened awareness of the risks posed by terrorism in Europe. The incidents led to an increase in reinsurance premiums and a re-evaluation of coverage limits.

• South African Protests and Civil Commotion (2021): The widespread protests and civil unrest in South Africa in July 2021 resulted in extensive property damage, looting, and business interruptions. The insurance industry faced a surge in claims related to civil commotion and political violence. This incident highlighted the importance of having robust reinsurance coverage to manage the financial impact of such large-scale disturbances. Reinsurers have since been closely monitoring the region, adjusting their risk models and capacity to better address the potential for future unrest.
• Russian Invasion of Ukraine (2022): The ongoing conflict in Ukraine has had a significant impact on the global reinsurance market. The war has led to extensive property damage, business interruption, and a surge in claims related to political violence and war risks. Reinsurers have faced challenges in pricing and capacity, with Lloyds of London and other major players reassessing their risk exposure and implementing stricter underwriting criteria.

This has resulted in less capacity available on the market, and an increase in demand with more and more clients feeling the need to be covered and the necessity for comprehensive reinsurance solutions to protect businesses operating in conflict zones as well as unaffected regions.

The Mauritian insurance market, while geographically distant from many of these global incidents, is not immune to their repercussions. The effects on premiums and reinsurance capacity can be significant. Even unaffected regions and markets have seen a substantial rise in premiums, and reinsurers being less flexible in including extensions such as Denial of Access and Contingent Business Interruption. The current global volatility also entails that reinsurers are no longer able to book their capacity for quotations for long period of times, given that when claim scenarios occur, they are significantly large.

The Role of Political Violence Reinsurance

Political violence reinsurance provides an additional layer of protection, helping insurers manage the financial impact of claims arising from such events. Key benefits include:

• Financial Stability: By transferring a portion of the risk to reinsurers, primary insurers can maintain financial stability and continue to offer coverage to businesses operating in high-risk areas.
• Enhanced Coverage: Political violence reinsurance allows for more comprehensive policies that address specific threats, offering tailored solutions to meet the needs of diverse industries.
• Resilience and Recovery: In the aftermath of a political violence event, swift claims processing and financial support are crucial for businesses to recover and resume operations. Reinsurers play a pivotal role in ensuring that claims are met promptly and efficiently.

Our Approach to Political Violence Reinsurance

At EllGeo Re, we are committed to providing our clients with the best possible protection against political violence risks. We believe that political violence reinsurance is not just a safeguard; it is a strategic tool that enhances resilience and supports long-term success. Our approach includes:

• Risk Assessment and Analysis: We conduct thorough assessments of the political landscape and potential threats, enabling us to offer informed recommendations and customised reinsurance solutions.
• Global Expertise: With a dynamic approach, our team is well-equipped to navigate the complexities of political violence risks, taking into consideration the regional and international political climates.
• Collaborative Partnerships: We work closely with leading reinsurers worldwide to secure robust coverage, ensuring our clients have access to the most reliable and comprehensive reinsurance products available.

For more insights and to discuss how we can support your Risk Management strategy, connect with us on LinkedIn or visit our Website at www.ellgeo.com.

Together, let’s “make it happen” for relevant solutions in reinsurance to address the political violence risk!