How Political Violence Insurance UAE Helps Mitigate Threats

The only upside to political violence is that it’s a low frequency, high severity event. So while global political instability is a given, risks are becoming more foreseeable and manageable, even in a downturn, if you “front up” to them. And it’s one of the risks the OECD, IMF, and finance ministers are putting on the table. On the positive side, western-led sanctions, litigation, and political settlement can deter recidivists like Russia and Sudan. Nevertheless, as oil prices fall EIU predicts rising risks in oil rich countries. And everyone knows that when bread is dear and speculation is rife, instability is too easy. Hence the likely increase in demand for political risk, kidnap & ransom, and terrorism covers in the Middle East and Africa.

Understanding Political Risk in the UAE Context

The increasing number of terrorists and the failure of unstable governments to control their countries guarantees that not a day goes by without unfortunate casualties of the military and civilian liability population. These adverse risks are typically preceded by warnings from so called experts that seem painfully vague or overly alarmist. Why is such a dangerous landscape developing, and doesn’t it mean greater forewarning of risks and a less profitable business for insurers? The reality is that the tapestry of risk is now so broad and interconnected that it’s impossible to properly mesh the extent of the physical and political damage with the LTC (long tail claims). It is more important than policyholders realize. The ongoing terrorist attacks globally and their ongoing political effects and related military crossfire losses lead to civil liability losses have driven up normal construction and construction damage costs. Would any insurance company protect against possible future military losses and political campaign costs? We doubt that many have even inquired. ADVERTISEMENT

The best advice, therefore, is to consult with professionals like the organization’s own financial, legal or insurance advisors and have the experts explain exactly what is covered, what isn’t and where there may be risk overlap with existing protections or gaps. Ensemble’s head of MENA for insurance brokerage Howden, Lester Albos, adds: “We often find the misconception that policies you pay for directly are more expensive than included cover with something else… It’s a logical assumption, but the reality is that this is not always the case.” Providers also have unexpected dispensations available, like premium refunds for unused pieces of insurance that aren’t tied into bank guarantees or other cash assets.

The Terrorism Threat and Business Continuity

How did terrorism insurance come to the fore and what has been its impact on the commercial landscape?

What Terrorism Coverage Actually Protects

I’m not sure anyone really knows. But it’s the nature of the (re)insurance industry to write policies that specifically exclude such a wide range of circumstances and collectively hoard huge sums of ‘premium dollar’ money to pay claims related to these original risks.

Political Violence and Terrorism Cover: Beyond Property Damage

How do you create a map that predicts terrorism or sabotage from civil disobedience when the primary sources share perimeter and rushing shelter or alternative delay procedures for catastrophe evacuations transpire to cover disease escapees engaging in civil disobedience or sabotage? I suspect the answer is you model the toxicity from the event rather than the event that may be toxic.

Can a parametric insurance program be devised if the policyholder is responsible for the predetermined event? It’s not an easy problem space. It’s not really political violence and the risk is in the quarantine understandably corrosive for a carrier if not modeled as a multiple peril policy including workforce loss due to disease. We patch that loss back in.

Customizing Coverage for Your Business Profile

How do you think political violence will change as a risk in our region in the next five years? Will violent protests or strikes by highly disillusioned, severely disaffected, and often quite volatile youth, triggered by soaring unemployment and the failure of governments to tackle corruption or institute meaningful reforms, continue to increase? Will terrorist attacks with greater mass casualties gradually become the preferred means for some of those who seek to undermine our interests? Perhaps couching their actions in the protection of their state, will some nation states more or less deliberately try to arouse aggressive nationalism in order to distract from their failing policies and weak social contracts or in response to accusations that they are poisoning newly arrived economic migrants? I’m not sure anyone really knows.

But it’s certainly not difficult to build a case that the risks are escalating. First, violence in general is on the rise in much of the world. Some states in the Middle East, Africa, Asia, and Europe are experiencing their most violence since the end of the Cold War.

The Claims Process and Real-World Application

Some experts suggest that innovations like blockchain technology, which automatically updates widely dispersed databases as soon as a claim event happens, will help improve access. For instance, blockchain is already being used for parametric insurance or retrocessions where a trigger event (such as a natural disaster or political demonstration) kills all argument over whether or how an insured loss has occurred.

However, any other insurance product with a political risk trigger will not only be disputed by insurers who are under significant pressure, as we have argued, will be triggered by the current global crisis,” so argue that blockchain will greatly improve access to political risk coverage. A key take away point is that transparency and better, easier, faster data will almost certainly improve access to political risk insurance products in the same way it will make all coverage probably cheaper.

Strategic Risk Management Through Insurance

Can your current program address this evolving peril? Terrorism insurance is designed for losses from politically motivated malicious acts, such as bombings, which are often committed by politically motivated individuals/groups with the intent or influencing a government and broader public in their pursuit of political or religious objectives. It also does not have what is called “Silent Cyber” applications, where a cyber event triggers traditional insurance coverage that does not explicitly refer to cyber in the policy wording. Cyber events, which are not classed as terrorism would not be payable under a standalone Terrorism Insurance policy. Are there opportunities for clients to explore broader solutions when considering terrorism and other risks?