Anticipate more political unrest, Allianz advises companies
‘#EndSARS“Protests in Nigeria, student protests in South Africa or clashes in Ethiopia that result in damage, unrest and ultimately loss are now among the top political risks for businesses.
According to the latest issue of Global Risk Dialogue from Allianz Global Corporate & Specialty (AGCS), this will be compounded by the continued impact of the COVID-19 pandemic, which may boost business.
The report released on Wednesday stresses that business continuity planning must proactively address the risks of political violence, especially in high-risk sectors such as retail.
“Fortunately, large-scale terrorist events have declined dramatically over the past five years. However, the number, scale and duration of riots and protests over the past two years is staggering, and we have seen companies suffer significant losses, ”notes Bjoern Reusswig, Head of Global Solutions to Political Violence and hostile environment at AGCS.
“Civil unrest has exploded, prompted by protests on issues ranging from economic hardship to police brutality, which have affected citizens around the world. And the impact of the COVID-19 pandemic is making matters worse – with few signs of an end to the economic downturn in sight, the number of protests is likely to continue to climb, ”Reusswig said.
Civil unrest, as a major business risk, leads to physical damage, business disruption or loss of income, and incidents become a greater risk for businesses in today’s environment, as the findings of the report show. Allianz Risk Barometer 2021. In the annual Global Risk Survey, “political risks and violence” returned to the top 10 risks for the first time since 2018. This risk trend is supported by recent research findings which predict that The ranks of global protesters will increase over the next two years.
Verisk Maplecroft, a research firm specializing in global risk analysis, expects 75 countries to experience an increase in protests by the end of 2022. Of these, more than 30 mostly in Europe and the Americas – are likely to experience significant activity.
Political violence also sparked large insurance claims in 2020. While protests over George Floyd’s death at the hands of Minneapolis police, which took place in 140 US cities in the spring, have been mostly peaceful, with the arson, vandalism and looting that made it cost the insurance industry at least $ 1 billion to $ 2 billion in claims, according to Axios.
Businesses do not have to be directly affected by civil unrest to suffer financial losses. Income can suffer if the surrounding area is cordoned off for an extended period or while infrastructure is repaired to allow the re-entry of customers, vendors and suppliers.
For example, during the “yellow vest” protests, shops along the Champs-Élysées in Paris were looted and heavily damaged, which drove customers away. After just a few weeks of protests, the French Retail Federation reported that retailers nationwide had lost $ 1.1 billion in revenue.
The COVID-19 pandemic risks fueling further violence
The COVID-19 pandemic is a key factor in the rise of civil unrest as it has both amplified long-standing underlying grievances and given them a focal point. The pandemic has negatively affected political stability, increasing polarization and highlighting equality issues, worsening working conditions and civil rights.
“Unfortunately, the risk of riots and violence is likely to worsen from COVID-19,” says Michael Stone, risk consultant for AGCS North America. “The measures that governments have used to combat the coronavirus have had a significant socio-economic impact and frustration is increasing among large segments of the population. The impact is particularly evident in the United States, where the social safety net is not as comprehensive as elsewhere. People are worried. Jobs, health and income security are all gone. They are more likely to protest and have a shorter fuse, so it’s no surprise that anti-lockdown protests can turn violent. “
The fact that the pandemic has allowed conspiracy theories to flourish among layers of the population also sets the stage for future turmoil – and even physical damage in some cases, according to Reusswig. A theory that groundlessly links 5G technology to the coronavirus has led to a series of arson attacks on cell phone towers in South Africa, Nigeria, the UK and other European countries.
Businesses should also review their insurance policies. Real estate policies can cover political violence claims in some cases, but insurers also offer specialized coverage to mitigate the impact of strikes, riots and civil unrest through the specialized political violence market.
“Previously, this coverage was considered a ‘good to have’ for customers and ‘nothing too worrying’ by insurers. However, that has changed since 2018, as the frequency and severity of these events has increased dramatically. We are seeing a growing interest and demand for political violence covers from businesses, ”says Reusswig.