Navigating the Complex Landscape of SRCC Risks in Global Insurance

The global insurance and reinsurance sectors are facing heightened concerns over the aggregation risks associated with strikes, riots, and civil commotion (SRCC), a threat that has intensified in various countries. The past five years have witnessed significant violent unrest in nations including Chile, Hong Kong, the United States, South Africa, Ecuador, Peru, and France. These events have not only caused substantial property damage but also led to significant insurance claims, raising alarms about the potential for future violence, especially in a year with 76 global elections.

During the 2023 Rendez-Vous de Septembre in Monte Carlo, the SRCC issue was a focal point among C-suite insurance leaders. Discussions revolved around the suitability of including SRCC coverage within standard property all-risk programs or segregating it into specialized markets focused on war, terrorism, and political violence. The debates stem from the realization that traditional property all-risk programs often do not adequately aggregate SRCC exposure, as evidenced by extensive claims following unrest in Chile in 2019 and the U.S. in 2020.

The challenge lies in the wording and time element of SRCC coverage, notably the 72-hours occurrence provision, which, during prolonged periods of unrest, can lead to unanticipated accumulation of claims. This realization prompted a reevaluation of whether SRCC risks should be more tightly controlled and aggregated, possibly moving towards specialized markets that can offer more focused coverage and risk management.

Moreover, the insurance industry is urged to not only reconsider the structuring of SRCC coverage but also to proactively monitor the socio-political climates of regions prone to unrest. Understanding underlying grievances, such as inequality, poverty, and police brutality, and recognizing the amplifying role of social media in organizing and intensifying protests, are essential for predicting and preparing for potential SRCC events.

Looking ahead, with significant elections in South Africa and the U.S. in 2024, the industry faces uncertainties that could trigger further SRCC events. The potential for a coalition government in South Africa and the prospect of a contentious U.S. presidential election underscore the need for the insurance sector to be vigilant and adaptable in managing SRCC risks.