Strikes, Riots and Civil Commotion: Exploring solutions to proactively manage heightening risk

Undoubtedly, the impacts of Strikes, Riots and Civil Commotion (SRCC) are at a historical high.

It wasn’t long ago that no single SRCC event had exceeded USD 1 billion in losses, with the most significant instance on record having been the Los Angeles riot in 1992. In more recent times though, large scale SRCC events have accumulated to the extent that SRCC has become a prominent risk topic for (re)insurance industry CXOs and Board of Directors (see table).

From the French riots in 2023 to the Black Lives Matter movement in 2020 and the Chilean riots a few years prior, we have seen a massive escalation in SRCC events, resulting in significant loss spikes.

However, it’s not just the severity of SRCC events that has increased, but also the frequency.

According to Carnegie Endowment for International Peace’s Global Protest Tracker, for example, more than 132 countries have experienced protests since 2017, with 23% of these lasting more than three months.

When looking at the number of claims from SRCC worldwide across the industry we saw more than a 3000% increase in the past two decades from 2000 to 2020 (see chart which is an indication of the global trend). It seems unlikely that this upward curve will flatten anytime soon.

Reflecting on the growing frequency of events, populist and anti-establishment movements have triggered a rise in polarisation among populations and a greater willingness to protest.

We’ve witnessed how the resurgence of activism around key global issues such as the environment and diversity, equity, and inclusion have sparked riots and unrest around the world, while political grievances spanning everything from poor public services to corruption and authoritarianism are snowballing more rapidly than ever before.

At the same time, economic ill feeling continues within the current cost-of-living crisis, with squeezed consumer budgets, rising inflation, higher food and energy prices and tax increases all exacerbating the problem. The rising conflicts are also causing supply chain disruptions, especially as trading routes are impacted and goods are subject to increasingly complex delivery routes.

Regarding the rise in losses associated with SRCC events, there are also several contributing factors.

We’ve seen how social media can play a significant role in magnifying and accelerating events – not only do these global platforms make it easier to mobilise masses at speed, but they can also provide the information, context and inspiration for events to escalate both across a single country and different international communities.

A prime example of this can be seen in the French riots last year where social media played a role in exacerbating societal tensions following the fatal shooting of a teenager during a police traffic check in Paris. The circulation on social media of videos capturing the sad events went viral, sparking riots, violence and mass demonstrations across France and further afield outside of the country of origin.

In addition, urbanisation is also playing a major role. Much like NatCat events, the potential impacts of SRCC events today are much greater than they were 50 years ago. Simply put, rising concentrations of populations in major cities have created a higher density of valued assets within a heightened risk landscape.

In urban environments, retailers and public infrastructure are particularly vulnerable to broad, simultaneous protests and can accumulate losses very quickly.

The concerns around the heightened risk of SRCC cannot be ignored. In many geographies, SRCC is a mandatory insurance coverage and is part of the spectrum of risks that the (re)insurance industry is here to cover. With this in mind, we must collectively do more and find better ways to provide solutions to the risk exposure.

So, what steps can the (re)insurance industry as a whole take in response to heightening SRCC risk?

Assessing and adequately pricing for the risk of SRCC is crucial for insurers and reinsurers and an area that should continually improve. Exposures must be considered, assessing everything from geographical value distribution, exposed occupancies and locations to recent socio-political developments and previous SRCC loss experiences. Coverages also need to be considered, looking at silent coverage versus explicit extensions, and the extent of specific provisions such as exclusions or limitations. Here we are working with clients to ensure contract certainty and implement clauses to help contain the risk whilst also providing adequate coverage to their clients.

The industry also needs to develop better models to take control of accumulation risks and identify where exposure concentrations exist within their portfolio for a specific geographic area or industry. The insurance industry also needs to do more to properly capture exposure data specific to SRCC and ensure it flows through the (re)insurance value chain. Swiss Re is already helping clients by providing data insights that can help highlight accumulation issues especially to susceptible occupancies.

SRCC risk exposure also needs to be contractually captured in a more effective, clear, and transparent manner, helping implement boundaries for certain risks. To this end, contractual wording assessment must be enhanced.

Part of those efforts should include revisiting those definitions of SRCC that are included within contracts to avoid carrying for anything outside of the expected parameters. It’s difficult to draw exact lines, of course. However, transparent and accurate definitions can help in distinguishing key differences, such as between riots and terror events, for example.

It’s good to see that some steps are being taken, and risk awareness is clearly increasing in the market. Further, we’ve seen some positive effects from the implementation of government pools in some geographies dedicated to SRCC that can help to provide affordable cover against increasing risk severity.

However, we must prepare for a world in which potential centres of SRCC break-out have multiplied and can spread more quickly and widely. As social economic factors increase the magnitude of loss and the unpredictability of the risk, it's paramount that the industry leverages data and technology to manage this growing risk through improved exposure assessment, adequate risk pricing, better accumulation control and clear contractual wordings.