As companies expand into emerging territories more and more are buying political violence insurance. But claiming after a loss can be complicated by uncertainty over the exact causes.
Political violence insurance is increasingly bought by companies in order to mitigate risks ranging from terrorism through to hostage situations.
But settling a claim can be less straightforward than insured companies might expect, due to potential differences in how damages are defined.
For example, the spring of 2010 saw serious street clashes in Thailand’s capital, Bangkok, as supporters of ousted Prime Minister Thaksin Shinawatra mounted protests aimed at forcing fresh elections.
There were almost 100 fatalities, hundreds were injured and the protests caused significant damage to property across the city and extensive interruption to business.
An upmarket retailer in central Bangkok, and a client of JLT Specialty, suffered both physical damage and interruption to its business, despite taking prudent action by closing operations while the protests were at an early stage.
Terrorism or riot?
The Thai authorities, including the government insurance commissioner, General Insurance Association, defined the protests as terrorism.
But political violence and terrorism experts assessed that a range of perils had occurred as the unrest developed from riots to revolution, making it difficult to pinpoint the cause of damage.
Matters were further complicated by disputes over whether insurers providing strikes, riots and civil commotion cover should respond first – causing many claims to remain in dispute for months.
However, JLT’s claims professionals were able to convince the insurers that they were liable for the loss due to the comprehensive perils covered by the policy, thus securing the first settled claim following the unrest.
No witnesses to explosion
Claims can also be complicated by an absence of witnesses.
For example, the separatist fighting in Ukraine has claimed many victims and caused incalculable damage to property. Among those incurring damage was a global commodity trader, which saw five grain silos, each containing 8,000 metric tonnes, destroyed in an explosion.
The violence meant that the site had been evacuated of most staff and there were no witnesses to the explosion. There was no police report possible and no site inspection could be made.
The claim was complicated further as the insured company was storing wheat for a third party, which was undeclared to insurers, while recent improvements to the facility had increased its value from $2 million to $5.6 million.
Claims professionals persuaded insurers that the third-party wheat was covered under ‘care, custody and control’ while underwriters also accepted the change in value of the facility, subject to proof of the cost of repairs that the insured supplied to underwriters.
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For further inform, please contact Chris Holt, Head of CPS Analytics & Consulting on +44 (0)20 7886 5423