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Increase in Political Violence and Terrorism: A Need for a Change of Insurance Strategy

There has been an increase in the number of crisis happening across the globe. There is civil unrest in Venezuela and Brazil. United Kingdom has seen an increase in terrorist attacks. Diplomatic relationship within the Middle East is becoming weaker day by day. The world is experiencing increased nationalism.
Experts have voiced their concern on the dangers multinational businesses face in this era of violence and crisis. They risk losing their assets, operations and the people who work for them face a greater risk of being out of job. It is therefore necessary that they prepare for any unforeseen disaster by using an insurance coverage. Before making a choice of the type of insurance coverage to go for, one needs to clearly understand them. After going through the benefits of each one will discover that the political risk insurance has an edge over terrorism insurance or political violence insurance.
Understand and weigh your Options
Though the three policy types provide cover for business interruption and property damage or loss, the underlying cause for each differs.
  1. Terrorism Insurance: applies when political, ideological and religious motives are the reasons for terrorism.
  2. Political Violence Insurance:covers terrorism, and strikes, civil war, strikes, war, insurrections, coup d’états and rebellions.
  3. Political Risk Insurance:this provides a broader coverage than the other two. It covers risk which results from government instability and actions such as expropriation of assets, political violence, currency inconvertibility, contract frustration, forced abandonment, and nonpayment.
Broader Coverage
Most multinational companies usually go for the Terrorism Insurance or the Political violence because they are cheaper than the political risk insurance. However, this action may prove unsafe in many cases. Government and insurers usually determine if a particular event fits under the type of policy the multinational company opts for. If the political and terrorism insurers feels that an event falls into the other category of policy, then they might deny coverage.
Political risk insurance provides a broader coverage by providing covers for both peril. This ensures that there would be no dispute over claims. An association for the export credit and investment insurance industry, Berne Union, projects that over $1 billion have been paid by political risk insurers in the last five years.
Another benefit of going for the political risk insurance is that it provides cover for risks that change with time. These claims weren’t profound in the past. There was however a sudden rise in insurance payments and forced abandonment claims due to unrest in Ukraine, Libya and other similar countries.
Though terrorism and political violence insurance have their own advantages, political risk insurance covers more grounds than them. Contact your insurance advisors to determine the policy type that would be ideal for your company.