Political risk cover changing with evolving threats
Source: Middle East Insurance Review | Oct 2016
The challenging macro-economic environment, recent terrorist attacks in France, Belgium and other countries, growing cyber threats, and not least, political uncertainty caused by the recent UK referendum vote to exit the EU, demonstrate a clear demand-supply gap and a need for appropriate insurance solutions, said media reports.
An avenue of innovation is likely to be in the political violence segment. As terrorism risk shifts away from large explosions towards “lone-wolf” shooter attacks, the demand for insurance is expected to change from property damage insurance to business interruption cover – for example, Air France-KLM recently announced that the Paris attacks led to a EUR52-million (US$58.3-million) drop in revenue.
The growing terrorism threat is also evolving into new digital channels – it is sometimes impossible to determine whether a cyberattack has been organised by a terrorist group or because of different motives, creating a need for more advanced cyber security product wordings and specialty cyber terrorism products
At the same time, political risk and crisis management insurance is evolving towards prevention and response consulting services. Customers are demanding better levels of service beyond standard protection cover as they are seeking to prevent risks from happening and have an efficient response after major events. Insurers have responded by forming innovative partnerships with specialised risk intelligence and crisis response agencies.
Two typical products for such partnerships have been Kidnap & Ransom (eg, Hiscox forming an exclusive partnership with incident response provider Control Risks to offer efficient incident management) and Product Recall (eg, Allianz forming a strategic partnership with Red24 to manage product recalls or contamination and resolve emergency incidents).
EUR1 = US$1.12