Despite governments responding to the COVID-19 pandemic by closing borders and enforcing social isolation measures, recent political movements have impacted populations across the world. Incidents appear to no longer be in isolation, instead occurring on a coordinated global scale. Driven by evolving ideologies and changing sociocultural values, localised events are now increasingly gaining momentum across multiple regions.
Globally, recent losses (USD) caused by strikes, riots and civil commotion events include:2
The frequency and intensity of strikes, riots and civil commotion events are no longer limited to territories which have traditionally been deemed politically unstable, rather risks are escalating across all regions.
The impact on business
Businesses across the world are facing significant
losses caused by strikes, riots or civil commotion.
From damaged property and inventory to business
interruption, the loss of revenue in the aftermath of an
event can challenge businesses with immediate and
long-term impacts.
“Riots triggered business losses
in at least 40 cities across 20 US
states in 2020, and financial
losses are thought to rival the
costliest civil disorder in US
history – the Los Angeles 1994
Rodney King riots which caused
USD 1.42 billion in damages2.
In Hong Kong, ongoing unrest
led insurance claims to reach
around USD 77 million – the
third-highest amount in the
city’s history by incident3.”
Managing SRCC risk
There are various established insurance products that cover SRCC and associated risks, such as malicious
damage, terrorism and war, both in the cargo market and in specialist terrorism or political violence markets.
“SRCC coverage has traditionally been a
standard bolt-on to a cargo placement
via specific SRCC clauses, with little
conversation around the actual exposure
or premium being charged. This has
started to change, with markets being
increasingly focussed on the scope of
coverage being provided relative to the
potential risk exposure. Additionally,
some cargo underwriters have started to
question whether SRCC coverage should
more appropriately be underwritten in
specialist markets, such as terrorism or
political violence, where such risks are
closely monitored.
It’s important for businesses to
understand the coverage available in the
cargo market and the potential limitations
of standard ‘all risks’ cargo policies.”
Kris Kimble, Director - Marine Cargo at Aon
SRCC, much like war, is excluded under standard ‘all
risk’ cargo clauses, however, coverage is typically written
back into cargo policies using specific provisions e.g.
Institute Strikes Clauses (Cargo) – CL.386 and SR&CC
Endorsement (form No.9).
Solution spotlight: cover for SRCC
Cover for physical loss or damage cover as a result of:
- Strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions
- Terrorism
- Any person acting from a political, ideological or religious motive
Firms with exposures need to understand the coverage
provided by each policy, where/if coverage intersects,
and if there are any gaps in coverage which could leave
the business exposed. For example, static terrorism
coverage is not provided for under the above SRCC
writeback clauses due to the standard use of the
Termination of Transit Terrorism Exclusion clause.
It’s important for businesses to consider the coverage
available in the insurance market for SRCC risks. Working
with industry specialist brokers can help businesses fully
understand the scope of current coverage and explore
mechanisms to minimise any changes in the market.
There should be conversations around:
- Identifying when coverage attaches and terminates for certain perils
- Focusing on the distinctions of what constitutes SRCC, terrorism or war to avoid any disputes arising from ambiguity across varying definitions of the SRCC perils
- Distinguishing between what would be considered a single event or occurrence for the purpose of applying limits and deductibles
How is the cargo market responding?
Retailers have experienced far greater losses as a result
of SRCC events and therefore organizations with retail
store exposure are seeing their coverage being closely
scrutinised, with some cargo markets potentially looking
at increasing deductibles, reducing/aggregating limit or
even removing coverage entirely from a cargo policy.
Key takeaways
-
SRCC events are increasing in frequency and severity, and not limited to
territories which have traditionally been deemed politically unstable
-
SRCC coverage has often been included with little or no premium
associated to the risk
-
Underwriters are increasingly focused on the scope of coverage being
provided, with some calling for SRCC risks to be covered in specialist
markets
-
Standard ‘All Risks’ cargo policies can have limitations and it’s important
to discuss the nuances of SRCC coverage in the cargo market
-
Ambiguity exists, and disputes may arise, given the varying definitions
of the SRCC perils and there is a very thin dividing line between what
constitutes SRCC, war or terrorism
-
Working with a specialist broker enables businesses to fully understand
available coverage and explore mechanisms to minimise the changes in
the market
1: https://www.aon.com/2020-political-risk-terrorism-and-political-violence-maps/index.html
2: https://www.insurancejournal.com/news/national/2020/10/13/586329.htm
3: https://www.finews.asia/finance/30026-nearly-80-million-in-insurance-claims-linked-to-hong-kong-s-anti-government-movement
To discuss any of the topics raised in this article, please contact
Kris Kimble or
Shady Ismail.
Kris Kimble
Director - Marine Cargo
London
Shady Ismail
Senior Vice President – Marine
San Francisco