US riots a “catastrophe” event - PCS

Castrophe loss information company, PCS, has designated ongoing riots across the US as a catastrophe event with more than one state.Tens of thousands of people have defied curfews to take to the streets of major US cities to protest over the death of George Floyd, a black man in police custody.

“Claim handling from the riots should provide an indication of what could happen post-event if a major hurricane or tropical storm were to make landfall this year,” says Tom Johansmeyer, head of PCS, a Verisk business. ”Let’s not forget that Covid-19 remains an issue. Remote claim adjusting tools, aerial imagery, and connection via apps should feature more prominently than site visits. We’ll see how insurers are able to put those resources to work once the claim handling process starts on this event.”

“Riot tends to result in disproportionately more commercial cases than other catastrophes, and as a result, the claim lifecycle – and total time to report on the event – may be a bit longer. Factors related to Covid-19 could present further challenges. Determining lost revenue could become particularly problematic.”

The contagion of unrest from one state to another could impact how the insurance and reinsurance industry approaches underwriting strike, riot and civil commotion coverage (SRCC) going forward, thinks Johansmeyer, with SRCC coverage moving back into the standalone political violence market.

”What makes this particularly interesting – aside from the fact that our twelve over historical riot evens are single-state – is the fact that the states aren’t always contiguous,” he told StrategicRISK. “This could result in a mismatch where reinsurance treaties require contiguous states – or even counties. While this mismatch may not lead to much in the way of disagreement this time around, it should drive a serious discussion across the industry about how strike, riot, and civil commotion is handled.”

“In recent years, we’ve seen that losses to large property programs can disproportionately shape the industry-wide insured loss from a catastrophe event. In Chile, last year, only a handful of retailers were responsible for roughly a third of the industry loss. And in the 2016 political violence event we designated in Turkey, we saw the energy sector drive some additional insured loss that was inconsistent with the average claims paid for the rest of the event.”