NU Online News Service, April 19, 2:30 p.m.EDT

As political unrest envelops North Africa and the Middle East, aglobal-insurance broker says insurers are reviewing their appetitefor political coverage at a time when multinational companiesshould be performing their own review of risk.

In its report titled “Political Risk Insurance: Mind The Gap,”insurance broker Willis Group says that while “companies may beable to assess and manage technical and even commercial risks, itis extremely difficult to deal with or indeed predict politicalevents.”

Nevertheless, it is important for corporate executives to reviewtheir exposure and make sure that they have the right planning andinsurance coverage in place to deal with the effects of politicalunrest on their business.

In a statement, Bob Peilow, managing director of Willis GlobalSolutions (International) and lead author of the report, says:“What shocks a lot of people about the latest wave of politicalunrest is the unpredictability around where it will happen next,and the fact that today’s stable or ‘investor-friendly’ regime canvery easily become tomorrow’s hot spot. This is why it is soimportant that companies have the right coverage in place shouldthe unthinkable happen.”

Toward that end, Willis says there are three main types ofinsurance coverage that companies concerned about political unrestshould consider:

• Strikes, riots and civil commotions (SRCC) insurance.
• Terrorism coverage, which Willis says is known as the Lloyd’ssabotage-and-terrorism-only form.
• Full political violence coverage.

Of the three, full political violence coverage is the mostcomprehensive, dealing with a full range of civil unrest includingrevolution and coup d’état. Premiums are fixed at inception andwill cover abandonment of property without physical damage.

There are exclusions for war between the five great powers;nuclear, chemical and biological attacks; expropriation; and theft.However, chemical and biological can be included underendorsement.

While insurers have not pulled coverage in unstable territories,they are reviewing their risk appetites to determine their “abilityand desire to continue offering even the more basic form ofSRCC.”

Specialist insurers, primarily Lloyd’s of London, are continuingto offer terrorism and full political violence coverage.

Touching on the issue of evacuation of staff from politicallyunstable situations, the report says that companies in the bestposition to help employees were those that obtained kidnap andransom (K&R) insurance.

Under those policies, assistance and costs of evacuation ofstaff in places where political unrest arose were covered. Thereport cites several incidences where it was necessary to evacuatestaff and clients did not know they had K&R cover until it wasbrought to their attention.

To be prepared, Willis advises that companies do some basicplanning and preparation in advance of an emergency to ensure asmooth decision-making and implementation process.

Willis Group President Grahame Millwater notes: “Exposure topolitical unrest will only grow as global business continues toexpand into new and often hostile territories where the threat ofresource nationalism, creeping expropriation and supply-chainvulnerability is increasing. Our message to companies around theworld is to use their brokers to navigate the insurance optionsavailable for these risks and to identify any potential gaps intheir coverage.”