Risk managers must work with peers, brokers and insurers to address gaps in political violence cover as global instability accelerates, Gallagher’s Jonathan Rae told StrategicRISK.
Rapidly evolving political violence and war risks are testing whether organisations’ mitigation plans and insurance cover remain fit for purpose.
Jonathan Rae, executive director of crisis management at Gallagher, told StrategicRISK that events in the Middle East have left some companies discovering their cover is not what they expected. As a result, risk managers face a renewed need to address policy gaps.
He was speaking as risk managers gathered in Birmingham for the Airmic annual conference, where he joined a panel discussion on current political risk challenges facing businesses.
“Political risk is such a large topic, and it is difficult for the insurance market to get to grips with how the market is changing.
“It is even harder for risk managers to understand the risks especially for those with multinational exposures given the specific risks from country to country.”
A fast-moving risk class
Rae added: “You can see the situation every day when you turn on the news. We have regional wars underway and the climate and global warming is impacting the energy market, creating a food crisis and with it new risks around conflict and security.
“We are seeing growing instability across the world and for risk managers it creates a growing challenge. There is a pandemic of political violence.
“Technology is spreading information and disinformation ever more rapidly. A movement can start in one country and quickly spread across the world. In the past that would be a slow process. We see easy access to materials which can radicalise readily available, and it can create terrorism, civil disturbance, war, kidnappings and attacks in the workspace.”
Rae said risk managers need to take a broader approach to the risks they face, including greater collaboration and more external threat analysis.
“They need to collaborate with their peers in their locality, and seek external help, including brokers and the use of threat analysis for new territories if there are plans to expand your footprint.
“You need to look at safe travel policies for staff and contractors which are travelling on behalf of the business. I would go so far to say you need to think about your staff and where they are planning to travel for holidays. There are parts of the world which have traditionally been seen as popular destinations, such as Dubai are now more risky.”
Testing whether cover responds
Rae said risk managers should also examine whether existing terrorism cover is sufficient, particularly where definitions and exclusions could affect claims.
“Risk managers need to ask themselves is terrorism cover enough? We have had clients in the Middle East which have seen their claims denied. There are definitions and exclusions and I believe it is growing area as risk managers hear from colleagues and other businesses over the problems they have had.”
He added that Gallagher’s role has expanded as clients demand more support across prevention, placement and crisis response.
“We are moving ever more into consultancy to work with our clients not just on the placement of the policy but also prevention and crisis response in the case of a loss.
“It is a new age in specialty insurance from a crisis management perspective. We are working with our clients to ensure that we can identify and address the gaps in coverage.
“Risk managers need a broader approach which includes response and prevention strategies. A lot of clients are coming to us. They know of companies which have had issues.
“We see clients are more interested in the political and security issues and we are getting a lot of interest from clients around how they can tackle the issues of what is a very fast-moving risk class.”
Collaboration with the market
Rae said the industry response remains dynamic, with brokers and insurers working together to adapt political violence products.
“Political violence insurance is very much a collaboration between the brokers and the insurer to develop the product,” he explained. “The products are rarely created in isolation. We are working with insurers to provide a product which is as complete and effective as possible.”
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