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5 key considerations to mitigate risks amid growing political and social unrest

By Wendy Peters | May 31, 2019

When it comes to the combustible world of political unrest, companies that plan ahead and review both their risk appetite and insurance coverage are well-placed to manage the hazards.
Insurance Consulting and Technology|Credit, Political Risk and Terrorism|Risk & Analytics
Risk Culture|Geopolitical Risk

In early February 2019, France recalled its ambassador to Italy for consultations. French leader believed the Italian government was attempting to influence French domestic politics, especially after the leader of one of Italy’s ruling coalition parties publicly met with representatives of the Gilets Jaunes (Yellow Jacket) protest movement.

This movement had started back in November 2018, with large numbers of citizens claiming to be non-political and demanding specific aims, such as a reduction in vehicle fuel prices. Their fury was against a government perceived to be elitist and out of touch. Although levels of participation have reduced, the protests continue and could transform the risk exposure of companies operating in France.

Domestic disputes such as the Yellow Jackets, similar protests in Albania and Spain, as well as disagreements between European governments illustrate the continuing levels of uncertainty across Europe. But this situation is not confined to one geography.

There has also been widespread unrest in a number of Latin American and Southeast Asian countries. Tens of thousands took the streets in Brazil to protest against government cuts and spending freezes, and the ongoing issues in Venezuela have led to continued nationwide protests. Most recently we have seen clashes in India with political supporters fighting during campaign rallies with attendant loss of life. Companies should be aware of how these seemingly remote and disparate events could affect them, and should pay particular attention to five key areas:

  1. Loss of access — Many organizations may lose access to their premises either due to a protest or as a safety measure during the protest. Where there has been law-breaking and significant disorder, the organization may stay closed due to damage or ongoing police investigations.News media have reported that businesses in many of the French city centers have seen revenue fall by 20% to 40% and businesses submitted more than 1,600 loss claims, with over $100 million being paid for damages attributed to violence and looting where demonstrations and rioting have occurred. A large consumer electronics and household appliances retailer reported a loss in sales of around €45m in France and Belgium due to closing retail outlets within or with close to areas of protest and public disturbance.
  2. Loss of attraction — Politically unstable conditions can result in a public reluctance to travel to a country. Citing a loss of attraction in France, a Franco-Dutch air carrier reported losses of €15m due to cancellation in bookings arising from the protests and the publicity given to them. Large corporations also reported that the protests had similarly impacted parts of their businesses that were exposed to the French tourism sector.
  3. Impact on people — While business continuity experts should be able to handle crises in the workplace, demonstrations outside are harder to control but can have an equally dramatic effect on employees. Civil unrest can happen anywhere at any time and to be prepared for the unpredictable, employers should take action to implement policies and have plans in place, such as building evacuation or internal evacuation, or “invacuation,” and transport plans that are part of much wider business continuity planning.
  4. Impact on brand and reputation — Predicting the occurrence and nature of political and social disruptions is nearly impossible. However, investing time in preparing a crisis communication plan is imperative. The plan should be tested and updated regularly and continually revised to take account of changing circumstances. While it may never be needed, it could save your company’s reputation and protect your employees from potential harm.
  5. Impact on your supply chain — Civil protests and riots have led to supply chain disruptions. Loss of communications, travel hazards and general time delays can occur due to unrest, with the result that if a company does not have operations in affected regions, transportation through them can be delayed and cargo damaged or destroyed. The size and duration of these events can be unpredictable, making it hard to put alternative plans in place with sufficient speed.

Check your insurance policies

Losses may be covered under general property insurance policies. Yet in the absence of physical damage, the business interruption that ensues post event, may not be covered. If a policy includes terrorism coverage but doesn’t include cover for riots, strike, civil commotion, you may struggle to make a successful claim.

Having clarity on what is included and excluded under a general property policy is important. Stand-alone solutions covering political violence are available and it is worth considering these strike, riot and civil commotion losses alongside the more traditional terrorism and sabotage exposures.

The future remains stubbornly uncertain and unknowable, particularly when it comes to the combustible world of political protest. But companies that plan ahead and invest time in reviewing both their risk appetite and insurance coverage are well-placed to manage the hazards as well as the opportunities, and plan now for tomorrow’s events.


Terrorism and Political Violence

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