Insurers grappling with the increased risk of physical attacks on businesses due to war or civil unrest are reconsidering the breadth and scope of such cover in potential conflict hot spots.
Political violence cover, which can be obtained by businesses to insure against physical damage caused by war, terrorist attacks, strikes or riots, can be purchased as a standalone policy along with property insurance or as part of a political risk package.
However, international underwriters have largely pulled back from offering such policies in Ukraine after the Russian invasion and have significantly slowed business in Israel since its conflict with Hamas, industry sources told Reuters. .
They are now weighing reducing coverage for other regions seen as potentially vulnerable to unrest in an effort to avoid losses, including in Taiwan, amid fears of a Chinese attack.
“There is a chance that the reaction in Ukraine and others will have a big impact on other parts of the world that are not live situations now but may live in the future like Taiwan,” said Tarique Nageer, advisory on the placement of terrorism. leader of broker Marsh.
Many of the political violence policies were written in the Lloyd’s of London insurance market, as well as insurers based in the United States and Bermuda, while separate war policies were offered in aviation and shipping.
“You can’t get anything in Ukraine at this point in time. For places like Taiwan, the available capacity is down maybe 50%, if not more,” Nageer added.
Insurers have reduced political violence and broader political risk cover in Taiwan after Lloyd’s asked its members earlier this year to identify potential exposure to so-called realistic disaster scenarios related to regional conflict.
Lloyd’s chief executive John Neal told Reuters in September that exposure to the Taiwan market was “manageable”.
‘House on fire’
Because political violence policies are usually annual, insurers can make quick decisions not to renew them.
But some have even moved to offer monthly cover in Israel, said Hamish Greenwood, head of crisis management at insurance broker McGill and Partners.
“Some syndicates offered 12 months worth before Russia invaded Ukraine and people got burned,” he said.
Some have dropped it entirely, especially for new clients, with insurance sources worried about the conflict spreading in neighboring countries like Lebanon.
Greenwood said a client in Haifa, in northern Israel, who once bought protection against $100 million in damage is now struggling to get $10 million in cover.
“Effectively, you’re insuring a house that’s on fire,” he added.
The rates for political violence covered in Israel are higher than in the rest of the world because of the perceived risk.
“There are more markets that are reluctant to write (covering) Israel now than before. Israel has probably seen a 75% reduction in available capacity,” Nageer said.
Some rates have risen 10 times or more in the past few months, Greenwood said, although an underwriter who declined to be named said rate increases are likely to be lower in parts of Israel far from in the Palestinian territory.
And insurers say the business hasn’t completely dried up.
“For long-standing clients who have bought cover, you don’t want to drop cover,” says Roddy Barnett, head of political risks and trade credit at insurer Beazley.
“We are citing small businesses in Lebanon and in Israel, it’s not like the market has run away.”
Israel, Hamas engaged in fierce fighting in southern Gaza
(Reporting by Noor Zainab Hussain in Bengaluru and Carolyn Cohn in London; editing by Sinead Cruise and Alexander Smith)
Photo: A boat passes through the water at the 68-nautical-mile scenic spot, the closest point of mainland China to the island of Taiwan, in Pingtan in southeast China’s Fujian Province, on Friday, August 5 , 2022. China conducted “precision missile strikes” in the waters off the coast of Taiwan as part of military exercises that raised tensions in the region to their highest level in decades after the visit of US House Speaker Nancy Pelosi. (AP Photo/Ng Han Guan)
Property Trends Carriers
Interested in Carriers?
Get automatic alerts for this topic.