Insurance Marketplace Realities 2022 Spring Update – Terrorism and political violence

Rate predictions: Terrorism and political violence

	Trend	Range
Terrorism and sabotage		+5% to +10%
Political violence		+10% to +20%

Key takeaway

Rates continue to edge upward along with the threat of terrorism, sabotage and political violence on several fronts.

The crisis in Ukraine has given rise to widespread questions about insurable risk and the application of war exclusions.

• As hostilities, catastrophic damage and the application of sanctions grow, the insurance and reinsurance marketplace is braced for significant losses, with major specialist carriers already experiencing a drop in share value.
• Insureds in the region will be closely evaluating coverage for loss due to war, generally excluded from property policies. Concern also surrounds the application of the five powers war exclusion, which withdraws coverage from any conflict between two or more of these nations: Russia, United Kingdom, United States, China and France.
• Sanctions may also impact companies’ losses in Russia and Belarus. Certain governments may prohibit payment of claims if in violation of sanction law.
• An increase in incidents of civil unrest is anticipated as antiwar sentiment and food shortages increase.

The stress of two years of pandemic restrictions has provoked a dramatic increase in acts of violence, thrusting new challenges upon public and private organizations around the world.

• The mandated enforcement of government public health controls has led to widespread interruption of trade and transit — and to frustration. The impact on industry has provoked concerns about the adequacy of conventional all-risk property insurance to respond to financial loss in the absence of direct physical damage.

Terrorism remains a major concern, as incidents of domestic extremism increase, and new global terrorist cells are revealed. Ideologically inspired violence continues to pose a significant threat to national security.

• Insurers continue to offer a wide spectrum of dedicated products designed to mitigate the consequences of an act of terrorism or civil unrest — and, if possible, prevent such acts.
• Despite the increasing threats and incidents, market capacity for terrorism and political violence remains steady, though we anticipate rates to trend upwards as losses accumulate.
• A new generation of crisis management analytical tools offers quantitative and qualitative intelligence with respect to risk concentrations, proximity to potential targets and threat hot spots.
• Captive insurance structures remain a vehicle to access the indemnities provided under TRIPRA (Terrorism Risk Insurance Act 2019), delivering enormous capacity and broad coverage scope.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for losses relating to the Ukraine conflict. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include coverage relating to the Ukraine conflict. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third-party sources we consider reliable; however, we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. -The Ukraine conflict is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.