imia annual conference 2015 · hdi-gerling industrie . versicherung ag . merida (yucatán), mexico,...

IMIA Annual Conference 2015 Working Group Paper [WGP 90 (15)]

“ Strike, Riot and Civil Commotion (SRCC) Risks in Engineering Insurance”

Dieter Spaar

Head of Engineering Underwrit ingInternat ional

HDI-Gerling Indust rie Versicherung AG

Merida (Yucatán), Mexico, September 2015

The current presentat ion is serving in present ing the working group’s paper under the sam e subject . The paper and presen ta t ion are based on the experience of the working group’s m em bers in the insurance indust ry. The op in ions expressed hereunder a re so le ly those of the au thors for the respect ive chapters each m ember has com posed and do no t in any way reflect the views of any insurance com pany or any o ther lega l en t ity involved in the insurance indust ry. All the au thors have served in the ir personal capacit ies.

The presen ta t ion and the paper a re no t m eant to be exhaust ive and o ther aspects m ay exist , p resum ably affect ing the profitab ility o f an insurance po licy, which m ay not be described hereunder.

The au thors do no t cla im ownersh ip of any m ateria l, in format ion or idea included in th is p resen ta t ion . The presen ta t ion m ay conta in links to th ird party web sites. These links are p rovided so le ly as a convenience to you and the inclusion of any link does no t im ply endorsem ent by the au thors o f such th ird party web sites, o r any associa t ion with the ir opera t ions. The au thors a re no t responsib le for the conten t o f any th ird party web site and do no t m ake any represen ta t ions regard ing the conten t o r accuracy of m ateria ls on such th ird party web sites.

Should the reader have a lte rna t ive views on the op in ions perce ived by the au thors, any opportun ity for fu rther d iscussion / views’ exchange will be welcom ed.

WGP 90 (15) - trike, Riot and Civil Commotion (SRCC) Risks in “ S Engineering Insurance”Dieter Spaar, Head of Engineering Underwriting International, HDI-Gerling Industrie Versicherung AG

IMIA Annual Conference 2015 - Merida (Yucatán), Mexico, xx Sept 2015

Disclaimer

WGP 90 (15) - trike, Riot and Civil Commotion (SRCC) Risks in “S Engineering Insurance”

Insurrection Revolt Rebellion

Insurgency

Commotion

Civil commotion

Uprising

Riot

Official strike

Unofficial strike

Force majeure

Political risk

Dieter Spaar, Head of Engineering Underwriting International, HDI-Gerling Industrie Versicherung AG


Tumultuous Violent disorder

Affray

Terror

Civil warPublic order

SRCC??

1. Why at all?

2. What makes SRCC cover peculiar?

3. Def init ion/Borderlines to similar terms

4. UW Considerat ions

5. Risk / Loss management

6. One w ay out – decision t ree

7. Conclusion.


SRCC – Topics of discussion


WGP 90 (15) - trike, Riot and Civil Commotion (SRCC) Risks in “S Engineering Insurance”Dieter Spaar, Head of Engineering Underwriting International, HDI-Gerling Industrie Versicherung AG


SRCC – Why at all?The market

ProjectInvestor

Investment re tu rn

Security

Riskt ransfe r

Financia l instab ilityPolit ica l

instab ility

Insurance

0

50

100

150

200

250

Num

ber o

f Rio

t Eve

nts

Data Source: Wikipedia list of Riots

http://en.wikipedia.org/wiki/List_of_riots


IMIA Annual Conference 2015 - Merida (Yucatán), Mexico, Wednesday, 4 March 2015

SRCC – Why at all?The exposed areas – „ not in mycountry“



... a building undergoing refurbishment and fully insured under a Construction Policy issued by

….you ?

Wasn‘t it ?--- but it could !

SRCC – Why at all?The exposed areas – „ not in mycountry“


SRCC – Why at all?Our aim To promote common understanding.

To raise awareness of contractors, brokers and underwriters (not an “ innocent” cover).

To provide the interested part ies with a basic guidance on necessary informat ion expected to be included in an underwrit ing submission.

To help ident ifying issues of relevance.− Focus: Underwrit ing , Risk Engineering , Cla ims.− Defin it ion of Perils; Cover g iven .− Insurab ility Aspects.

To foste r Best Pract ice (Underwrit ing).

All pa rt ie s’ in te rests to be taken in to conside ra t ion in the fina l coverage so lu t ion .


1. Why at all?






7. Conclusion.




“As we know, There are known knowns. There are things we know we know. We also know, there are known unknowns. That is to say, we know there are some things we do not know. But there are also unknown unknowns, the ones we don't know we don't know.”

Things we are aware ofand understand

Thingswe are aware of

but don‘t understand

Thingswe understand but we are not aware of

Thingswe are neither aware

nor understand

Known

Unknown

Knowns Unknowns

SRCC – What makes it peculiar?




SRCC – What makes it peculiar?Not a „traditional“ peril


1. Why at all?






7. Conclusion.




Contract Language ≠ Insurance Language

SRCC– as d iscussed in th is paper is limited to d irect physica l loss to insured property caused by People act ing in d istu rb ing public peace and au thorit ie s to suppress tha t .

Polit ical Risks – may insure :− Expropria t ion− Exchange t ransfe r con t ro ls− License cance lla t ion….− ….− Kidnap & ransom− …− Trade d isrup t ion


SRCC – Definition / What is it … is it notSRCC ≠ Political Risks / Force Majeure


Strike:− a period of t ime when workers refuse to work because of an argument w ith an employer

about working condit ions, pay levels, or job losses. (ht tp://dict ionary.cambridge.org/dict ionary/english/)− a concerted stopping of work or w ithdrawal of workers' services, as to compel an employer to accede to

workers' demands or in protest against terms or condit ions imposed by an employer (www.oxfordlearnersdict ionaries.com).

− a. to declare or engage in a suspension of (work) unt il an employer grants certain demands, such as pay increases, an improved pension plan, etc. b. to declare or engage in a suspension of work against (a factory, employer, indust ry, etc.) unt il certaindemands are met . (ht tp://dict ionary.reference.com).

Riot− a noisy, violent , and uncont rolled public meet ing (ht tp://dict ionary.cambridge.org/dict ionary/english/)− a situat ion in which a group of people behave in a violent way in a public place, of ten as a protest

(www.oxfordlearnersdict ionaries.com)− a noisy, violent public disorder caused by a group or crowd of persons, as by a crowd protest ing against another

group, a government policy, etc., in the st reets (ht tp://dict ionary.reference.com).

Civil Commot ion− a violent situat ion in which many people in a public place cause serious damage (Cambridge Business English

Dict ionary)− Civil commot ion refers to a public revolt by a large number of people who cause harm to people or property. It

is a revolt by the people for general purposes and it usually involves many more people than a riot . Civil commot ion is a kind of civil disobedience movement by the people which is serious and prolonged compared to riot . Usually, the insurance companies w ill not make good any loss happening by any civil commot ion. The f ire policies and other property insurance policies contain a clause except ing the loss caused f rom a civil commot ion. (ht tp://def init ions.uslegal.com)


SRCC – Definition / What is it … is it notVarious „Dictionary“ Definition


http://dictionary.cambridge.org/dictionary/english/

http://www.oxfordlearnersdictionaries.com/

http://dictionary.reference.com/


http://www.oxfordlearnersdictionaries.com/

http://dictionary.reference.com/


http://definitions.uslegal.com/


Wide spread def init ionsdepending on local law (case law/common law vs Civil Law vsReligious Law; …)

Country examples:

England: No conclusive defin it ion , bu t cla rified in case law tha t st rikes are confinedto em ployment-re la ted act ivit ies; no vio lence or tum ult needed to be defined asst rike .

Azerbaijan: Defin it ion does not lim it st rike act ions to em ployment-re la tedact ivit ies:" Organizat ion by a group of persons of act ions, roughly breaking a socialorder or connected to insubordinat ion to legal requirementsof the authorityrepresentat ive, or entailed on inf ringement of normal act ivity of t ransport , enterprise, establishment and organizat ion, as well as act ive part icipat ion in such act ions.„

India: Sim ilar to one used in English law, no requirem ent of force , vio lence or tum ult

Turkey: „…concerted cessat ion by workers of their work with the object of halt ing the act ivit ies of a given establishment or of paralysing such act ivit ies to a considerable extent , or any abandonment by workers of their work in accordance with a decision taken to that ef fect by an organisat ion…”

SRCC – DefinitionsUnderstanding under common Law - Strike


Country examples: USA: A public d istu rbance involving an act o r acts o f vio lence by one or

more pe rsons pa rt o f an assemblage of th ree or more pe rsons, which act …. (United Sta tes Federa l Law) England: Where 12 or more pe rsons who a re p resen t toge the r use o r

th rea ten un lawfu l vio lence fo r a common purpose… Azerbaijan: no defin it ion , courts would be like ly to look to the closest

equ iva len t de fin it ions in the Crimina l Code , e .g . Mass d isorder o r Armed rebe llion India: An assembly of five o r more pe rsons, where the common ob ject o f

the pe rsons is a s fo llows… Turkey: no specific de fin it ion for rio t under Turkish law. Rio t cou ld be

likened to "Armed Uprising against the Government of the Turkish Republic" as pe r Turkish Crimina l Law; quest ionab le if th is meaning would be adopted by a loca l court in the meaning of rio t under the con text o f an SRCC clause .



SRCC – DefinitionsUnderstanding under common Law – Riot

So, what cover do we (intend to ?) provide ?



Where do theboundaries / limits ofcover lie?

SRCC – Definitions



SRCC – Definition / What is it … is it notInsurance Definition & Understanding

MunichRe – Def init ion – End 001

Extension − … loss of or damage to the property insured d irect ly caused by…− … disturbance of the public peace un less excluded be low− … act ion of any lawfully const itu ted au thority suppressing …− … wilfu l act o f any st riker o r locked -ou t worker…

„ Endorsement Exclusions“ Loss of or damage− (a ) …result ing ... from ... cessa t ion… in te rrup t ion of any process.− (b) …occasioned by …temporary d ispossession … confisca t ion … by any lawfully … authority.− (c) …occasioned by …temporary d ispossession of any build ing… (due to) … occupat ion…− (d) …consequent ia l loss … over and above .. the materia l damage…

„ Policy exclusions“− (a ) war,… warlike opera t ions.− (b) mut iny, civil commot ion … (if) popular rising ,… rebe llion ,…− (c) any act d irected toward the overthrow of government…

„ General Terms“– 168 hours clause .– Cance llab le – uncondit ioned - a t any t ime: re fund of p .r.t . p remium.– Onus of proof with Insured .– Limit : per occurrence : limited twice .– Extra Premium.

1. Why at all?






7. Conclusion.






SRCC – UW ConsiderationsEarly risk identification

Four main quest ions :

Pro ject Type (e .g . NIMBy e ffect )?

Environmenta l Impact?

Loca t ion /Count ry exposed to recen t economic, socia l, government /po lit ica l instab ilit ie s?

Has the owner o f the p ro ject conside red the SRCC (corpora te socia l re sponsib ility p rogram / adequa te security measures)?



SRCC – UW ConsiderationsIndicative riskswith high SRCC potential

Characterist ics ExamplesProject Type

Power p roduct ionHydro power p ro jects

Nuclear power p ro jectsWind tu rb ines

Min ing and Oil extract ion

Open p it m inesOil wells

Underg round MinesFracking p ro jects

Waste Disposal / Processing p lan ts

Nuclear Waste d isposalLandfill waste d isposal

Garbage Disposal Insta lla t ionsWaste incinerat ion p lan ts

Chem ical industry in sta lla t ions

Chem ical p lan tsOil Refineries

Sto rage tank farm s

In frast ructu re Highways

HVDC LinesAirports

"NIMBy" p ro jects (No t In My Backyard : a

com m unity opposing to the construct ion o f part icu lar p ro jects in / near their residence)

Prison

General o f p sych ia t ric o r o ther type o f hosp ita lslaugh terhouse

Fire arm s p roduct ionRelig ious bu ild ings and worsh ip

areas

Pro jects o f nat ional and /o r po lit ica l

in terest

Olym pic gam es bu ild ingsSport even ts (fifa , soccer world

cup , e tc.) bu ild ingsIn ternat ional venues (expo ,

b iennale , sum m its, m usic, e tc.)Bu ild ings a im ed to be used by

in ternat ional o rgan izat ions

Characterist ics ExamplesEnvironmental

Pollu t ion

Air po llu t ionWater po llu t ionSo il po llu t ionNuclear po llu t ionWater overuse and po llu t ion

Change o f landscape and nat ional parks’/ heritage endangerm ent

Marine p ro tected areas (oceans, rivers, lakes)So il erosionArchaeo log ical sitesHisto ric st ructu res

Fish and wild life endangerm ent

Defo resta t ionFauna & flo ra

Socio-economic and governance

Econom icCorrup t ionFinancia l environm ent /stab ility

Socia l

Dispu tes over land righ tsDisp lacem en t o f com m unit ies

Socia l un restIm pact on health o f com m unit ies

Inadequate health and safe ty standardsChild labor o r labor laws

Governm en t

Lack o f t ransparencyRepression o f workers' un ions

Neighboring sta tes and in terests

Po lit ica lMilitary fo rces o r arm ed g roups

Insu fficient pub lic consu lta t ionLocat ion Distance to popu lated areas, bo rders, natu ra l resources,

o ther bu ild ings (governm en tal, re lig ious, product ion,…)


IMIA Annual Conference 2015 - Merida (Yucatán), Mexico, Wednesday, 4 March 2015

SRCC – UW ConsiderationsAvailable tools & information

Google earth,google topics’ maps

Data.gov marble

World Bank,www.govindicators.org openstreetmap

Global Rights index

The U.S. Census Bureau

UNICEF

Bing maps

Plosone

World Health Organization

International Trade Union Confederation

Risk AdvisoryEnvironmental organizations (wikipedia)

United Nations,Human Development Index

MapQuest

IMFSocrata

Global Economy

Organisation for Economic Co-operation and Development

Social Justice Index

https://www.google.com/earth/

http://maps.google.com/gallery?hl=en

http://www.data.gov/

https://marble.kde.org/

http://www.worldbank.org/

http://www.govindicators.org/

http://www.openstreetmap.org/

http://survey.ituc-csi.org/?lang=en

http://www.census.gov/

http://www.unicef.org/

http://www.bing.com/maps/

http://www.plosone.org/

http://www.who.int/en/

http://survey.ituc-csi.org/

http://survey.ituc-csi.org/

http://news.riskadvisory.net/

https://en.wikipedia.org/wiki/List_of_environmental_organizations

http://www.un.org/en/

http://ec.europa.eu/environment/beyond_gdp/indicators_social_en.html

http://www.mapquest.com/

http://www.imf.org/

http://www.socrata.com/

http://www.theglobaleconomy.com/

http://www.oecd.org/about/

http://www.oecd.org/about/

http://news.sgi-network.org/uploads/tx_amsgistudies/Social-Justice-in-the-EU-2014.pdf



SRCC – UW ConsiderationsThe Cover

Implicat ions of Cover: CAR/EAR is an All-Risk Cover exclusion needs to be unambiguous (word ing de fin it ion) onus of p roof tha t exclusion a llows re ject ion of cla im(s) re st s with

insure r Limits - Sect ion 1 on ly (sect ion-limit vs po licy/even t -limit ) Time and a rea clauses (72 / 168 hrs?) CPM / Camps & Stores DSU TPL SRCC & Polit ica l Risks / Po lit ica l Vio lence Insurance Use of Cance lla t ion Clauses - cance lla t ion is “normally” no t an op t ion SRCC in Annua ls – Territo ria l scope ?

1. Why at all?






7. Conclusion.




WGP 90 (15) - “Strike, Riot and Civil Commotion (SRCC) Risks in Engineering Insurance”Dieter Spaar, Head of Engineering Underwriting International, HDI-Gerling Industrie Versicherung AG


SRCC – Risk ManagementEngineering Survey / Monitoring

Considerat ion of changes to the:

pro ject , in te r a lia :

− materia l changes (e .g . dam redesign , change of use , )− pro longa t ion (e .g . Metro in u rban /h igh ly commercia l a reas)− working condit ions (e .g . firing of pe rsonne l due to financia l

p rob lems)

government (po lit ica l), financia l and socia l circumstances, in te r a lia :

− Voice and Accountab ility o f the public, Po lit ica l Stab ility and Absence of Vio lence , Government Effect iveness, Regula tory Qua lity, Rule o f Law, Cont ro l o f Corrup t ion .

− Gross Domest ic Product (GDP) + GDP per cap ita , In fla t ion , Household Income, Household Debt , Household Consumpt ion .

− Human Deve lopment Index, Socia l Just ice Index.



SRCC – Loss Management

How do you prepare yourself against an SRCC Loss?• Securing of evidence?• Lines of communicat ion?Examinat ion of Coverage / Learning by examples:• Cause of loss?• Evolving event (SRCC evolving into rebellion)?

Now: Reality“− Damages fo llowing the assassina t ion of Benazir Bhut to…

Presiden t Pe rvez Musharra f: “ many of the damaged businesses have insurance cover… insurers are expected to meet their obligat ions…”

− During the “Arab Spring” in Tunisia… Comité Généra l des Assurance (department wih in Minist ry of Finance )… civil commot ion , insure rs were asked to acce le ra te the ir cla ims handlingprocedures… Insurance marke t : civil commot ion or popula r uprising?

1. Why at all?






7. Conclusion






SRCC –Worth a „ workshop“ ?

UW. Workflow Decision Tree Coverage

1. Why at all?






7. Conclusion.






SRCC - Conclusion

Engineering insurance mainly refers to tangible assets (designed, measured, calculated or set into operat ion, constructed, etc.) where risk and exposures are well known (probabilist ic NatCat modelling, experience based models etc.).

For SRCC the Underwriter must : − ga in knowledge on the exposure ,− “pred ict” possib le risk changes fo r the whole coverage pe riod , and − fo rmula te a coverage concept which cou ld presumably “make” the

risk insurab le

In a world o f uncerta in ty, how can one : − assess the vo la t ility o f human na ture , − est ima te the t riggering factors which can cause an ou tburst o f socia l

instab ility

and a ll th is th roughout a p ro ject ’s life span which may last fo r severa l yea rs?

Working Group:

Alon Eisenberg, Engineers, Surveyors & Loss Adjusters Andy Hot t inger, AXIS Re Europe Fat ih Agacik, VHV AG Federico Pereira, Hannover Re Gerson CMS Raymundo, AXA Corporate Solut ions Hari Radhakrishnan, HDFC ERGO General Insurance Co. Ltd. Int igam M. Seyfulla, Azerbaijan Industry Insurance Konstant inos Argyriou, HDI-Gerling Industrie Versicherung AG Mat thias Meyer, Munich Re Paul Low rie, Clyde & Co LLP Stephen Convery, Scor Global P&C

Sponsor:

Volkan Babür, Mapfre Genel Sigorta



My Special Thanksdevoted to

imia annual conference 2015 · hdi-gerling industrie . versicherung ag . merida (yucatán), mexico,...

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