5 Factors Stoking the Fires of Global Unrest, According to a Recent Report by Allianz

The Allianz Risk Barometer 2023 reveals growing civil unrest as a top concern. Here are the top things for risk and insurance professionals to consider.

By: Peggy Fogarty | March 22, 2023

Anger over growing social inequality and the cost of living, sinking faith in governments and institutions, and increasingly polarized politics, together with a rise in activism and environmental concerns, are the main factors expected to fuel incidents of strikes, riots and civil commotion (SRCC).

At least, that’s what a new report, Outlook: Strikes, riots and civil commotion – a test of business resilience, from insurer Allianz Global Corporate & Specialty (AGCS) has concluded.

Ongoing incidents of SRCC put political risk and violence as a new entry among the top 10 global risks in the Allianz Risk Barometer 2023.

Civil unrest risks rose in over 50% of countries between 2022 Q2 and Q3, as reported in the Verisk Maplecroft Civil Unrest Index, just as businesses witnessed an increased impact on their operations.

“Incidents of strikes, riots and civil commotion have not only increased in recent years, they are also becoming more intense and catastrophic. These types of events are making our era one of uncertainty,” said Srdjan Todorovic, head of political violence and hostile environment solutions at AGCS.

Since 2017, more than 400 significant anti-government protests have erupted worldwide, according to the Global Protest Tracker compiled by the Carnegie Endowment for International Peace. The Ukraine war is a significant factor in this ranking.

Unrest spreads quickly and widely due to instant communication and social media tools. Reported damages worldwide resulted in at least $12 billion in economic/insured losses from just six major incidents between 2018 and 2023, resulting in significant claims for companies and their insurers.

AGCS’s political violence team highlights the five main factors they expect to power further SRCC activity in 2023 and beyond:

1) The Ongoing Cost-of-Living Crisis

Economic optimism has collapsed globally, primarily related to inflation, rising energy prices, debt and food insecurity.

Half the countries surveyed in the 2023 Edelman Trust Barometer showed a double-digit year-over-year decline in the belief that their families will be better off in five years.

The Global Protest Tracker recorded 135 significant economic anti-government protests since 2017. Just over half of the protests globally in 2022 were triggered by economic issues.

2) Distrust of Governments and Institutions

Governments thought to be corrupt or perceived as being in power for too long can bring people into the streets, from issue-led demonstrations to broader anti-government movements.

Although mostly peaceful, protests can turn violent. Tragically, authoritarian governments used lethal force, killing protesters in 36% of protests in 2022, as the Global Protest Tracker reported.

In 2022 and early 2023, protests ignited over the rights of women and minorities in Iran, fuel prices in Kazakhstan, economic failures in Sri Lanka, abortion rights in the U.S. and COVID restrictions in China.

“Many autocratic regimes sought to limit access to the internet, social media and the use of apps,” said Etienne Cheret, regional practice group leader, crisis management, for the Mediterranean & Africa Region, at AGCS.

“They know how much the exposure of unrest has been amplified by the power of social media.”

3) Increasing Polarization

Polarized opinions undermine social cohesion and escalate a conflict, often resulting in violence. Social media platforms amplify and reinforce the entrenchment.

Political divisions have resulted in significant shifts to the left and the right in many countries.

For example, calls for radical policy change, disputes over election results and increased nationalism has resulted in unrest in countries such as Argentina, the U.S. and South Africa.

“Where protests are particularly disruptive, there is also the danger of counter-movements in retaliation, which can escalate conflict,” said Cheret.

4) A Rise in Activism

Anti-establishment sentiment fuels activists with a sense of injustice on many fronts, whether economic, racial, political, religious or ethnic.

Recent movements include the global Occupy movement against economic inequality, Black Lives Matter protests highlighting racial inequality, the #MeToo movement against sexual abuse and harassment, and the Stop the Steal campaign, which falsely claimed electoral fraud in the election of U.S. President Joe Biden.

“Where politics are polarized, people can feel a greater sense that their personal values are under attack and will take to the streets to defend them,” said Todorovic.

“Riots can erupt as a result around a single flashpoint, such as a heavy-handed response by authorities that is deemed unjust.”

Social discontent can then escalate across a wider area, with a greater number of people involved, and become civil commotion. Businesses can be vulnerable to property damage and looting if this spills into violence and opportunism.

5) Climate and Environmental Concerns

Unrest has increased in areas where governments backslide on climate change progress, such as fracking or reopening coal mines as a solution to reliance on Russian gas.

Businesses that profit excessively from these policy changes could also be targeted, as price hikes and food shortages spark further instability.

“Environmental protestors made colorful headlines in 2022 — such as activists pouring soup on a Van Gogh painting or gluing themselves to roads — and will continue to do so in 2023,” said Cheret.

“Climate change demonstrations tend not to be violent, but they can be disruptive, particularly if they affect transport infrastructure. We expect this kind of activity to continue, if not escalate, in the coming year.”

Risk Management and Insurance Recommendations

SRCC risks are not only a financial issue but can also impact operations, reputations, supply chains and operatives who work in or close to high-risk areas.

“The impact of these losses has prompted many buyers to reconsider and reassess their limits and coverage needs as a consequence of the contraction in available reinsurance/treaty capacity,” Todorovic said.

Businesses should view the current climate as a catalyst for evaluating best practices and policies around preparing office locations and employees for the impact of potential civil unrest.

AGCS risk experts suggest taking the following steps:

Remain aware of news on planned protests.
Revise and update your business continuity plan (BCP).
Increase security at distribution centers and reduce the inventory of high-value assets.
Prepare for moving more services online to support business continuity.
Protect your supply chains by ensuring diversity of geography and companies.
Review your property insurance policy to cover political violence claims, civil war, SRCC, terrorism and war. &

Peggy Fogarty is a business development and technical writing specialist. She is a graduate of the University of Arizona, where she received her master’s degree in family and consumer sciences, and Rutgers University, where she received her bachelor’s degree in anthropology and urban studies. She can be reached at [email protected].

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.