Political Violence: How Insurers Measure the Risk

As the Arab Spring gained momentum this year, the initial protests in Cairo’s Tahrir Square constituted civil commotion, in the parlance of the global insurance industry. When demonstrators demanded that Egyptian President Hosni Mubarak step down, they crossed into insurrection. After soldiers sided with the people, the military engaged in mutiny.

Such semantics may feel like distinctions without a difference. For underwriters in the specialty market of political violence insurance, though, they’re crucial. Providers such as Hiscox in London and Lancashire in Bermuda typically sell coverage from a menu that starts with sabotage and terrorism and moves through such perils as “strikes, riots, and civil commotion”; insurrection; and outright war. The problem is that events on the ground can be difficult to define. As incidents progress from one classification of political violence to another, insurers and insured don’t always agree on whether property damage should be covered.