Political Violence & Terrorism
New entrants drive market competition
In recent months we’ve experienced growing levels of competition within the Terrorism and Political Violence market as claims stabilize following the settlement of losses emanating from the Russian invasion of Ukraine. Further underpinning this trend is the addition of three new market entrants who remain keen to grow their respective market shares, which has prompted many carriers to reevaluate their underwriting strategies. Ultimately this has led to more favourable trading conditions for insureds following a period of market hardening.
Underwriting changes
Increased market competition has led to a broadening of terms and conditions (T&Cs) and whilst sublimited within listed countries, the gradual reinstatement of policy extensions such as ‘Threat’, ‘Contingent Coverages’ and ‘Miscellaneous Unnamed Locations’ is representative of this.
As far as new entrants are concerned, Lloyd’s Syndicates KEN (Ark) and Everest have started writing Political Violence & Terrorism risks in the London Market with a combined capacity of $100mn. Building on their footprint in commercial property, Aviva has also entered the market with further additions anticipated by the close of 2024 which include the managing general agent (MGA) Crux and two potential Lloyd’s syndicates.
Rates for Political Violence & Terrorism have softened in 2024 with competition being predominantly driven by new market entrants.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
With market capacity increasing and coverages remaining stable the rating outlook is varied. For insureds domiciled within the United Kingdom and North America, renewal rates are flat to -5%. In Chile following the settlement of numerous civil unrest losses dating back to 2019, rates spiked in the immediate aftermath and following consecutive loss free years we’re now seeing more significant reductions, in many cases exceeding -10% on prior year. The recent general election in South Africa which a was concern for many markets was mostly peaceful and subsequently renewal rates are largely flat.
Where the market remains firmer is the underwriting of Political Violence perils which includes coverage for War/Civil war or enquiries with locations in key US cities such as New York and Chicago. In both examples, insurers have finite amounts of capacity available per country or blast zone and where demand is elevated this is reflected in the rate charged by underwriters. The highest rate increases for Political Violence perils are in the Middle East where recent escalations have moved renewal rates in many cases beyond +40%.
Active Assailant coverages continue to have application in the North American market and remain available to insureds. Options for first party property damage, business interruption and ensuing liabilities are predominantly considered by clients in retail, hospitality and entertainment sectors. Both rates and capacity remain stable.
Expected capacity change in the next 6 months for claims-free portfolios
The Political Violence & Terrorism market has historically been considered a profitable line of business with positive loss ratios for underwriters. With rates increasing across the board following the Russia/Ukraine war, civil unrest in the Middle East and elsewhere, new carriers are seizing the opportunities of a "hard" market. This has resulted in rates falling due to the abundance of capacity even though the global risk profile is still high.
Expected coverage change in the next 6 months for claims-free portfolios
We expect that insurers will increasingly include ‘Unnamed CBI’, ‘Mis Unnamed Locations’ and ‘Threat’ in their coverage for Political Violence & Terrorism.
In a changing marketplace, its crucial that brokers are approached as early as possible to allow sufficient time to market each risk and deliver the best possible outcomes.
Emerging risks
With the evolution of social media and widespread political uncertainty, the threat of disruption emanating from civil unrest remains a concern for many insureds. In the majority of instances these protests have remained peaceful, but insureds are often unable to claim for ensuing business interruption as most programmes rely on a physical damage trigger. As a consequence, over the last year we’ve seen more enquiries for 'Impairment of Access' coverage, which responds to unrest should insureds be unable to access or operate scheduled locations. No physical damage trigger is required, rather coverage responds beyond a specified waiting period.
'Impairment of Access' has traditionally been of interest to insureds within Mining and Transportation sectors, however this coverage can also be tailored to benefit other occupancies as required.
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