After Hong Kong, SRCC restrictions remain

Post-COVID economic challenges are expected to continue to fuel the growth of “Strikes Riots and Civil Commotion” (SRCC) insurance, according to insurance company Chaucer.

SRCC insurance provides cover for loss or damages caused by riots, protests, strikes or other work-related unrest. 

Last year’s Black Lives Matter protests, which spread across 20 US states, is the latest major protest movement to highlight the need for specialist insurance cover to pay for damage caused by social unrests.

The protests between May 26 and June 8 of 2020 are estimated to have cost insurers between $1-2 billion, versus $1.42 billion for the LA riots in 1992 (Insurance Information Institute).

Businesses are increasingly finding that damage or other losses caused by Strikes Riots and Civil Commotion is not covered by their normal property insurance policy – creating demand for this specialist insurance.

Andrew Bauckham, head of Political Violence & Crisis Management at Chaucer explains: “A rise in civil protests globally has led to some international insurers excluding damage caused by these events from mainstream insurance policy. This process of removing cover was accelerated by the increase in global protests after the financial crisis, ranging from the Arab Spring to the Occupy Wall Street movement.”

“This has created the need for a specific class of insurance that banks, retailers, leisure operators, real estate funds and other businesses can buy to make sure they are covered for what can be very major losses.”

“Insurers that specialise in this kind of insurance haven’t been put off by the protests of the last year. They will still provide cover even for some of the riskiest locations or businesses but the insurance premiums will be adjusted accordingly.”

The rise in civil disturbances over the last decade is partly linked to austerity following the Global Financial Crisis and volatile commodity prices impacting local economies, according to Bauckham.

The impact of COVID on businesses and Government spending may present similar challenging conditions for the foreseeable future. 

SRCC is expected to become a risk excluded from even more general property insurance contracts as the Lloyd’s Market Association (which represents insurers) is preparing wording for property insurance policies that makes it clearer that these risks are not covered by property insurance.

As well as being driven by economic problems the rise in social protests in recent years is also thought to be due to a more rapid evolution of social values, accelerated by social media.

Bauckham adds: “Social media allows protests to leap from city to city very rapidly and in the case of the Arab Spring movement rapidly spread internationally, that creates a bigger risk that needs to be insured.”

Chaucer says that in general Latin America is seen as a higher risk location. Economies that are dependent on income from commodities (eg oil & gas, mining etc) can be more prone to social unrest as their economies can be more volatile.

However, recent large-scale protests in the US, France and Hong Kong shows that risks are not limited to the more politically more unstable or economically weaker countries.