2021 has been the most active year on record for civil disturbances. The Chilean ‘Social Outburst’ protests spread throughout the nation, the Zuma protests in South Africa escalated into widespread rioting and looting, sporadic riots continue in Hong Kong and then there was the extraordinary storming of the United States Capitol in January. These events, to name but a few, are part of a pattern of rising social tensions globally.
Covid and the associated lockdowns are certainly contributing factors, yet there are many others propelling these events as part of a persistent underlying volatility that is challenging the PVT insurance market.
One is the rise of groups that are often highly organised and some quite extreme, which infiltrate peaceful organisations. Various factions are also expert in inserting themselves into peaceful demonstrations and turning them violent; whipping up many who started out peacefully into believing more extreme action is called for. In these situations, as demonstrated many times in the last 18 months, a mob mentality can take hold of a crowd of protestors extremely quickly, often with catastrophic consequences.
Another factor driving civil unrest is the disaffection felt by many groups toward their governments, which they believe do not represent them or their worldview. It is common to find that, for different reasons, many groups do not consider their government recognises important changes happening in society, culture or the environment.
While there are clearly many groups that represent legitimate societal concerns, there are also outliers stoking a collective cauldron of discontent that is spilling over into civil disturbance. The frustration of not being heard is also a potent propellant driving civil disturbances; for some groups civil disobedience is the only way to get the attention they feel they or their cause deserves.
Social media also pays a crucial role in facilitating this, with people of a similar mindset or experience able to connect with one another in ways not possible before the internet. Those once considered to be fringe groups are now able to create platforms that can mushroom into global networks, which are sometimes reported on by mainstream traditional media. This creates momentum that can also attract support in terms of funding and, as they become more organised, this can also result in protests and demonstrations.
Other societal problems feed into this, such as the huge gap between different social groups’ earning capacity and the increasing number of people living under the poverty line in the developed world. For security operations – both state and private – managing the unrest caused by such a broad range of highly motivated and organised groups is proving much harder than many anticipated. This is also challenging the PVT insurance market, which for the last 20 years has been largely preoccupied with terrorism and extremist groups, with many PVT policy wordings in force today developed since 9/11.
Typically, these policies have been designed for very large businesses, yet SMEs are far more likely to be affected by demonstrations, which often take place in town or city centres. Damage, disruption or lack of access during seasons critical for some small businesses can seriously affect their profitability for that year. There is therefore a real vulnerability and risk for SMEs amid the escalation of civil disturbance. Larger firms tend to buy their PVT cover from large brokers, while smaller companies tend to buy very little, if at all. This is partly because, in turn, small businesses tend to go to smaller brokers, which may not have the knowledge or access to markets required to sell such products to their SME customers. At the same time, many SMEs also commonly believe TRIA will protect them but, while this offers good terrorism cover, it is inappropriate for most SMEs.
With this year setting records for the number of incidences of civil disturbance, there is little sign of this trend slowing anytime soon. It is incumbent on insurers therefore to ensure their policy wordings are fit for purpose in light of this growing threat. The need for insurers to better support their broker partners is also pressing, to enable them to assist their customers facing the challenges arising from the dynamic and shifting PVT risk environment.