Don’t Underestimate the Threat of Strikes Riots and Civil Commotion

From the gilets jaunes (yellow vests) movement in France to the Dutch COVID-19 curfew riots in Eindhoven and the very recent anti-government protests in Sri Lanka. We have all been able to see how isolated protests, demonstrations and other events which come under the banner of Strikes, Riots and Civil Commotion (SRCC) can easily evolve into extended periods of upheaval. Including in regions such as Europe where SRCC risks used to be low. 

We see that companies in the countries around us are more and more aware of SRCC risks. In the Benelux, however, it is still often seen as a remote risk. That worries me, to be honest, because Dutch and Belgian businesses can and do get hit by SRCC events. Consequently, because of the misconception that the likelihood of this risk affecting companies in the Benelux is low,  there is the very real possibility that many of them do not have the appropriate level of cover for this type of damage.

This is partly because the definitions of these threats have evolved in recent years. For example, the perception of what constitutes an act of terrorism has been influenced by events such as 9/11, where a recognised terrorist organisation with a clear political or religious ideology is responsible for a specific action or event. However, the lines between different definitions have become increasingly blurred. By its very nature, civil unrest can be hard to categorise, leading to significant evidential difficulties. This is particularly true when the individuals or groups causing the property damage do not claim responsibility and where their motivations remain unclear.

In addition, the interpretation of certain definitions may differ. When is it a 'traditional' spontaneous riot, and when is it a case of organised unrest, or an act of terrorism? And what is the difference between coverage for political violence and coverage for terrorism? If you are not aware of this, it can lead to problems when a claim is made. This became quite clear after the Thailand Protests in 2010. These started with a series of political protests but turned into a prolonged and violent clash between the protesters and the military culminating in significant damage to businesses. Due to a lack of policy definitions, discussions arose about the exact cause of the damage. There was also a lack of clarity about where claims belonged due to overlapping policies. Some insurance buyers found themselves with either double cover, or worse, no cover.

Damage as a result of an isolated riot is usually covered under standard all-risks property policies. But if it is no longer an isolated incident, it can be seen as civil unrest, which can be excluded within such a policy. It is also possible that not all forms of consequential damage are covered, such as business interruption.

Furthermore, we often see that riots are accompanied by looting. Think of the 2021 Dutch curfew riots in Eindhoven, or the riots in England in 2011, where there were violent confrontations between hundreds of rioters and the English police. Properties were damaged on a large scale and shops were looted. However, that type of damage was excluded, so the companies concerned had to bear considerable costs. It is therefore particularly important to check whether looting is covered, and if so, under what conditions.

Strikes, riots and civil commotion are an increasingly real risk, happening more often and with increasing severity, even in places where the risk was previously limited. It is important that you are prepared as an organisation: make sure that you have identified the risks for your organisation, that your policy is fit for purpose, and that claims can be handled quickly. We are happy to share our knowledge, for example in this extensive article (in Dutch) in Beursbengel, which shows how SRCC risk has developed in recent years and what impact this has had on insurance coverage.

Ron Verhulsdonck is Country President Benelux, Chubb

Legal insight – definitions of terrorism

Extract taken from Confidence in Conflict: Insuring Your Business Against Civil Unrest - Insurance Against Social Disruption, by Chubb and Kennedys (2021)

In the United Kingdom, section 1 of the Terrorism Act 2000 defines “terrorism” as the use or threat of “action” where the use or threat is defined to influence the government (or international governmental organisation) or to intimidate the public or section of the public, and the use or threat is made for the purpose of advancing a political, religious, racial or ideological cause. The “action” must involve serious violence to persons or property, or endanger persons or create a serious risk to the health or safety of the public.

Definitions of “terrorism” in insurance policies are usually consistent with the definition in section 1 of the Act. These definitions arose out of 9/11 and were intended to be wide enough to capture emerging terrorist threats, but the focus was on one-off attacks in the manner of 9/11. However, the breadth of the “terrorism” definition in section 1 and many insurance policies has the potential to apply to violent actions taken in furtherance of causes referred to in the case studies in this paper. That is because the definitions focus on acts of terrorism rather than acts of terrorists.

It could certainly be envisaged that the definition of “terrorism” in insurance policies may need to change and evolve given the political and social implications of referring to violent actions ostensibly taken in furtherance of otherwise legitimate causes as being “acts of terrorism”. However, differentiating acts of those furthering an ideological cause from those that do not remains a challenge.