Understanding Strikes, Riots and Civil Commotion Risks in the Cargo Market
Navigating New Forms Of Volatility
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Despite governments responding to the coronavirus (COVID-19) pandemic by closing borders and enforcing social isolation measures, recent political movements have impacted populations across the world. Incidents appear to no longer be in isolation, instead occurring on a coordinated global scale. Driven by evolving ideologies and changing sociocultural values, localised events are now increasingly gaining momentum across multiple regions.
Strikes and riots and civil commotions (SRCC) have escalated rapidly in recent years.
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The frequency and intensity of strikes, riots and civil commotion events are no longer limited to territories which have traditionally been deemed politically unstable, rather risks are escalating across all regions.
Impact on Business
Businesses across the world are facing significant losses caused by strikes, riots or civil commotion. From damaged property and inventory to business interruption, the loss of revenue in the aftermath of an event can challenge businesses with immediate and long-term impacts.
Globally, recent losses ($) caused by strikes, riots and civil commotion events include:
Managing SRCC Risk
There are various established insurance products that cover SRCC and associated risks, such as malicious damage, terrorism and war, both in the cargo market and in specialist terrorism or political violence markets.
SRCC coverage has traditionally been a standard bolt-on to a cargo placement via specific SRCC clauses, with little conversation around the actual exposure or premium being charged. This has started to change, with markets being increasingly focussed on the scope of coverage being provided relative to the potential risk exposure. Additionally, some cargo underwriters have started to question whether SRCC coverage should more appropriately be underwritten in specialist markets, such as terrorism or political violence, where such risks are closely monitored. It’s important for businesses to understand the coverage available in the cargo market and the potential limitations of standard ‘all risks’ cargo policies.
Kris Kimble, Director - Marine Cargo at Aon
Solution Spotlight: Cover for SRCC
Cover for physical loss or damage cover as a result of:
SRCC, much like war, is excluded under standard ‘all risk’ cargo clauses, however, coverage is typically written back into cargo policies using specific provisions e.g. Institute Strikes Clauses (Cargo) – CL.386 and SR&CC Endorsement (form No.9).
Strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions
Terrorism
Any person acting from a political, ideological or religious motive
Firms with exposures need to understand the coverage provided by each policy, where/if coverage intersects, and if there are any gaps in coverage which could leave the business exposed. For example, static terrorism coverage is not provided for under the above SRCC writeback clauses due to the standard use of the Termination of Transit Terrorism Exclusion clause.
It’s important for businesses to consider the coverage available in the insurance market for SRCC risks. Working with industry specialist brokers can help businesses fully understand the scope of current coverage and explore mechanisms to minimise any changes in the market. There should be conversations around:
Identifying when coverage attaches and terminates for certain perils
Focusing on the distinctions of what constitutes SRCC, terrorism or war to avoid any disputes arising from ambiguity across varying definitions of the SRCC perils
Distinguishing between what would be considered a single event or occurrence for the purpose of applying limits and deductibles
Key Takeaways
SRCC events are increasing in frequency and severity, and not limited to territories which have traditionally been deemed politically unstable.
SRCC coverage has often been included with little or no premium associated to the risk.
Underwriters are increasingly focused on the scope of coverage being provided, with some calling for SRCC risks to be covered in specialist markets.
Standard ‘All Risks’ cargo policies can have limitations and it’s important to discuss the nuances of SRCC coverage in the cargo market.
Ambiguity exists, and disputes may arise, given the varying definitions of the SRCC perils and there is a very thin dividing line between what constitutes SRCC, war or terrorism.
Working with a specialist broker enables businesses to fully understand available coverage and explore mechanisms to minimise the changes in the market
If you would like to discuss any aspects of these insights, or to better understand our capabilities in this area, please do not hesitate to get in contact with our team.
Kris Kimble
Director - Marine Cargo
kris.kimble2@aon.co.uk
+44 207 086 4214
Shady Ismail
Senior Vice President – Marine
shady.ismail@aon.com
+1 415 769 6476
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