Another risk threatens to strike at the heart of insurers’ ability to respond

It seems that there is plenty of unrest for those businesses looking to obtain cover for strikes, riots and civil commotion.

Broker Howden has warned underlying grievances tied to inequality, the cost of living crisis and broader disenfranchisement, combined with the lasting economic effects of COVID-19 and Russia’s invasion of Ukraine, have elevated SRCC risks in both advanced and emerging economies and caused a historic reset in the standalone PV market.

Recent outbreaks of violence in Chile, the United States, South Africa and Peru reflect a highly dynamic and interconnected risk landscape. These events saw violence spiral quickly to affect multiple locations and are indicative of rising discontent globally, as demonstrated by other incidents of unrest last year in Iran, Kazakhstan, Sri Lanka and Argentina. The broker added 2023 has offered little respite, with protests in France and Israel hitting the headlines in recent weeks.

All of which has reset insurers’ views of risk. Property insurers are increasingly withdrawing SRCC cover whilst risk appetite in the standalone market has reduced significantly. The fallout represents something akin to a perfect storm – demand up, supply down, triple-digit loss ratios and reinsurance retrenchment – resulting in a market-changing pricing correction.

Market pressures have been compounded further by the war in Ukraine, which in addition to causing one of the largest PV losses ever, has also exacerbated cost of living pressures and exposed other geopolitical risks that currently extend to rising tensions between China and the United States.

Tom Bradbrook, Executive Director, Howden Specialty, commented: “Such devastating losses have precipitated a correction in the PV market that looks set to persist for some time to come. Clients can therefore expect to continue to encounter difficult market conditions in 2023. For the cover that is most sought after currently – namely SRCC and full PV – line sizes are being cut across the board and certain risks are difficult to place, especially in more volatile areas. Rates are up for all perils and territories, with our pricing index showing an average increase of 80% since 2018.”

However the broker added what it described as a “highly dynamic threat landscape” has brought about the most significant recalibration to the PV market since its inception. Following a period of high profitability for the best part of two decades, 2019 proved to be a watershed moment. Long-standing soft conditions, characterised by marked declines in pricing and intense competition, have been arrested by the series of losses that moved the overall market into the uncharted territory of underwriting losses.

Such a pronounced change has transformed the pricing environment. After a prolonged period of sizeable rate reductions through most of the 2010s, pricing stabilised towards the end of the decade before the correction started to materialise in late 2020, accelerating rapidly into hard pricing territory in 2022.

While  unrest is on a global scale the shadow of Ukraine has been the biggest and on a scale that the market has rarely seen.

As well as being another billion dollar plus event – current estimates suggest the war in Ukraine will become the biggest PV loss since the standalone market was born 20 plus years ago – the crisis has aggravated an already hostile SRCC backdrop, Howden warned.

For businesses the issue of SRCC is being moved higher up the agenda and alongside cyber risks, the headlines and the losses have been accumulating for some time. This poses a major issue for the (re)insurance sector as their response will have a considerable influence on its efforts to restore relevance and its reputation post the COVID business interruption debacle.

Jon Guy, Editor,

Emerging Risks