Airmic 2021 Insights with Tariq Al-Salihi: Terrorism and Political Violence – a Global Threat

September 29, 2021

By Tariq Al-Salihi, Head of Crisis Management at Sompo International


While the world’s attention has been focused on Afghanistan and the return of the Taliban, stoking fears that the country could once again become a hub for terrorists, developments have been taking place around the world for some time that underline how terrorism and political violence are on-going threats in locations perceived as high-risk, as well as those historically considered to be safe havens.

Over the last few months, large-scale and often violent protests have been taking place in Colombia following the government’s planned changes to tax legislation. Although the government quickly withdrew its proposals, widespread unrest continues. Historically, Colombia has not always been a haven of tranquillity so these developments will not come as a surprise to many.

What is more likely to raise eyebrows, however, is that for some time now, countries that historically would have been considered low risk when it comes to political violence have been experiencing rising levels of protest activity. France (2018), Hong Kong (2019) and Chile (2019) have seen incidents of mass unrest resulting in significant property damage and subsequent business interruption losses. Most strikingly, we have witnessed this turbulent risk environment spread to the US with civil unrest becoming increasingly commonplace.

Providing the right protection

In light of these developments, risk managers need their insurers to respond. In both international and US insurance markets, there is variance in provision of Strike, Riots and Civil Commotion (SRCC) coverage, but traditionally for the latter these perils have been explicit or silent in the all-risk forms. However, the increasing frequency and severity of events is forcing reassessment by property markets in London and the US, with exclusionary language now commonplace across retail and hospitality occupancies.

In addition, as demand for SRCC cover in the US has increased, we have witnessed several property markets further restricting their offerings through the introduction of sub-limits. This had led to an opportunity for forward-thinking carriers like Sompo International to implement a collaborative approach, with property teams working closely with their colleagues in political violence and terrorism to provide one-stop solutions that address insurance buyers’ changing needs. This is particularly the case for those with exposures in New York, San Francisco and Chicago, where there is a marked shortage of capacity.

We have seen a significant increase in client interest in the stand-alone terrorism market, in part due to the heightened civil unrest in the last 12 months, but also because of rising property rates, especially in areas with high levels of exposure to natural catastrophes. This has had a knock-on effect on pricing for TRIA – the US federal backstop for insurers that offer terrorism insurance cover in the event of a large-scale terrorist attack, similar to Pool Re in the UK. As a result, more clients are seeking non-TRIA alternatives.

Lastly, a record year of gun violence in 2020 has further exacerbated the situation in the US.  Historically, coverage for this type of event has typically been included in general liability policies but we have seen many liability carriers start to impose firearms exclusions. Again, this has led brokers to seek alternative solutions from the stand-alone terrorism market that has responded by offering products including Active Assailant or Active Shooter policies.

Global developments

As we look ahead, the demand for terrorism cover in the US is unlikely to diminish in the short to medium term. Neither will it subside in other key markets – the effects of the pandemic in terms of exacerbating social unrest are likely to be continued to be felt around the world.

The Middle East is just one example. Here, the combined impact of low oil prices and COVID-19 will further exacerbate Saudi Arabia’s fiscal deficit. As a result, the Saudi government will have to prioritise investment and financial support into sectors of the economy most affected, with construction projects in the major city developments most likely to be impacted. Further erosion and pressures on the Saudi balance sheet will undoubtedly influence military spending to fight the on-going war with neighbouring Yemen. We have already seen an increased number of attacks on Saudi infrastructure in recent months.

Meanwhile, in the United Arab Emirates, the pandemic will continue to negatively impact tourism revenue and retail sales in Dubai, which was due to host EXPO 2020 in October 2020. It was estimated that the event would increase national GDP by 1.5% and create more than 227,000 new jobs. It is uncertain whether the event will be rescheduled, creating further pressure on the ruling family of Dubai and reducing its influence in the Gulf Cooperation Council. There is even a possibility that it may have to ask for assistance from Abu Dhabi, something that has happened previously, during the global financial crisis of 2008.

While Sompo International has been a major lead, building out its existing capabilities with new products to ensure that our offering is even more meaningful for our clients, this is a fluid and fast-moving market. In this environment, it has never been more important for insurers, brokers and clients to work closely together, to track and keep ahead of emerging threats, and deliver the right solutions to mitigate against them.




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