What's Happening?
The insurance industry is experiencing a significant rise in claims related to strikes, riots, and civil commotion (SRCC) in Western democracies, particularly in the United States. According to Howden Re, insured losses from SRCC events have increased dramatically, reaching over $8 billion between 2020 and 2024. This trend is attributed to growing political division and inequality, which have led to more frequent and larger protests. The U.S. is now ranked as the top Western democracy at risk for SRCC, with insurers beginning to exclude or restrict SRCC coverage due to the heightened risk. Companies are increasingly seeking specific SRCC coverage, and insurers are charging higher premiums for such policies.
Why It's Important?
The rise in SRCC-related claims poses
a significant challenge for the insurance industry, as it struggles to accurately model and price these risks. The increased frequency and severity of civil unrest events could lead to higher insurance costs for businesses, particularly those with retail assets. This situation also reflects broader societal issues, such as political polarization and economic inequality, which are contributing to instability. As insurers adjust their policies and pricing, businesses may face higher operational costs, potentially impacting their financial performance and investment decisions.
What's Next?
Insurers are likely to continue refining their models and pricing strategies to better account for SRCC risks. Businesses may need to reassess their insurance needs and consider additional coverage options to protect against potential losses from civil unrest. Policymakers and industry leaders may also need to address the underlying social and economic factors contributing to increased civil unrest to mitigate future risks.
