As Strikes and Riots Increase, Insurers Respond With Exclusions

The above headline was recently featured in insurance news reports from Chubb insurance and Insurance Journal and comes as no great surprise. Traditionally, claims arising from civil unrest (not terrorism or civil war) have commonly been included under Property Insurance policies, which in Thailand is titled as Industrial All Risk (I.A.R.) insurance and it’s attaching partner policy Business Interruption (B.I.).

Known in as short as an S.R.C.C. clause, Strikes, Riots and Civil Commotion losses have been steadily increasing for the past 5 years, across different parts of the world. The report mentions that events such as Black Lives Matter, the Arab Spring, Hong Kong protests, mass street protests in Chile and other civil protests have challenged the template, standard accepted meanings of civil unrest from the insurers perspective which in the past has mainly been aimed at protection from union strikes and labour related disputes. A common by-product of these actions, malicious damage, has also typically been insured. Insurers are forced to re-think the “all risk” I.A.R policy intention towards these losses which may be more properly defined as “political risks” – a type of cover associated with civil uprisings and terrorism that is handled under separate, specialist policies with much different premium and conditions, known as (you guessed it) Political Risk and Terrorism Insurance.

Risk assessment for cover and pricing for Political Risk and Terrorism is more focused. Insurers will consider the likely locations at risk, the sums insured, the economic sector the policyholder operates in and physical security more closely. This will impact the connected Business Interruption insurance which pays out for the financial harm caused to insured revenue or profits. Property insurers will limit their participation on these risks via sub-limiting or excluding cover, lowering the share which they’re willing to commit on a policy and increasing the premium or claim deductible.

Given Thailand’s political history, it is likely that local insurance buyers can expect similar unpredictable changes to their SRCC protection under their Industrial All Risk and Business Interruption policies.

Thailand Insurance Service is always happy to answer and questions on these policy issues and steer buyers towards making informed insurance purchase decisions.