Bloomberg Anywhere Login


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Insurers of Political Violence Seek to Define Arab Spring Damage

Sept. 1 (Bloomberg) -- As the Arab Spring gained momentum this year, the initial protests in Cairo’s Tahrir Square constituted civil commotion, in the parlance of the global insurance industry. When demonstrators demanded that Egyptian President Hosni Mubarak step down, they crossed into insurrection. After soldiers sided with the people, the military engaged in mutiny.

Such semantics may feel like distinctions without a difference. For underwriters in the specialty market of political-violence insurance, though, they’re crucial, Bloomberg Businessweek reports in its Sept. 5 issue.

Providers such as Hiscox Ltd. and Lancashire Holdings Ltd., based in Bermuda, typically sell coverage from a menu that starts with sabotage and terrorism and moves through such perils as “strikes, riots, and civil commotion,” insurrection and outright war. The problem is that events on the ground can be difficult to define. As incidents progress from one classification of political violence to another, insurers and insured don’t always agree on whether property damage should be covered.

Although brokers and underwriters rarely discuss specific cases, total claims arising from the Arab Spring may top $500 million, said Andrew van den Born, an executive director at broker Willis Group Holdings Plc in London. Disagreements over how to label the turmoil may mean insurers will be reluctant to pay many of those claims, people in the business say.

Causing Disputes

“This type of coverage lends itself to disputes,” said Daniel Wagner, chief executive officer of consulting firm Country Risk Solutions. “‘Was there a fire in your home?’ is a yes-or-no question,” he said. “‘Was this a riot or an insurrection?’ is not nearly as clear.”

More than 60 percent of 1,382 companies and other organizations surveyed by insurance broker Marsh & McLennan Cos. buy terrorism insurance. Last year, the survey found, insurance companies were willing to underwrite $3.8 billion in such coverage globally.

Since many governments in the Middle East had enjoyed long tenures, multinationals and local companies alike typically insured themselves against sabotage, terrorism, and civil commotion but rarely against graver perils such as insurrections or war. Rates have climbed this year as the turmoil boosted demand for policies covering more serious upheavals, brokers and underwriters say.

“In Bahrain, prices went up 400 to 500 percent overnight,” said David A. Austin, CEO of Visionary Underwriting Agency of Dubai. “In Syria, prices went sky-high.”

Too Risky

For decades, insurers considered insurrection and war too risky to cover. Before Sept. 11, 2001, terrorism was included in standard property-loss policies except in high-risk countries such as Colombia and Sri Lanka.

After the attacks, reinsurers such as Munich Re and Swiss Re Ltd. -- which write broad policies to cover the risks taken on by smaller insurance companies -- started to exclude terrorism from property coverage, opening up a separate market for terrorism insurance. As companies assessed the risks in many countries, they started buying coverage for other kinds of political violence.

Disputes over those policies arise when incidents shift from one type of political violence to another. When Hezbollah fired rockets into Israel in 2006, an Israeli company submitted a terrorism claim for property damage caused by the attacks. The insurer balked, arguing that by the time the destruction occurred the conflict had become a war, several people in the industry said. The claim was ultimately settled privately, said Charles Berry, chairman of Berry, Palmer, & Lyle, a London broker not involved in the case.

‘Very Profitable’

“The claims weren’t that big, and the account was very profitable,” Berry said.

The pick-and-choose approach to political-violence insurance was tested again last year when the Thai government called protests in central Bangkok acts of terrorism. That definition has led to about 100 disputed claims, according to the General Insurance Association, a Thai trade group.

The owners of the CentralWorld mall had terrorism insurance and expect to recoup damages. Another mall, Center One, had coverage for strikes, riots, and civil commotion -- but not terrorism. The mall’s management said its insurer is refusing to pay a claim for 120 million baht ($4 million).

Given the hodgepodge of policies in the Middle East, similar issues will surely arise from events there. Julie Martin, a political risk insurance broker at Marsh, said a new client asked her to evaluate a political-violence claim from the region on a policy sold by another broker.

“The claim didn’t fit with the events that occurred,” said Martin. Though she helped submit the claim, she said she told the client, “There is no way that the underwriter will pay.”

To contact the reporter on this story: Patrick Clark in New York at

To contact the editor responsible for this story: David Rocks at

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.