Businesses urged to prepare for rise in social unrest

Businesses have been urged to prepare for a rise in civil unrest as the cost-of-living crisis trails the COVID-19 pandemic, according to insurer, Allianz Global Corporate & Specialty (AGCS).

The insurer noted that damages and losses from previous protests in France, Chile, the US, South Africa and Nigeria cost billions of dollars, warning that companies should review and update their business contingency plans against possible supply chain vulnerabilities.

With confidence in traditional sources of information and leadership being undermined, the role of social media platforms in activating civil unrest is becoming increasingly influential, the insurers also observed.

In its latest report on ‘political violence outlook’, AGCS stated that strikes, riots and violent protest movements pose risks to companies because, in addition to buildings or assets suffering costly material damage, business operations can also be severely disrupted with premises unable to be accessed, resulting in loss of income.

“Civil unrest increasingly represents a more critical exposure for many companies than terrorism,” said Srdjan Todorovic, currently head of crisis management, UK and Nordics, at AGCS.

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“Incidences of social unrest are unlikely to abate any time soon, given the aftershocks of COVID-19, the cost-of-living crisis, and the ideological shifts that continue to divide societies around the world. Businesses need to be alert to any suspicious indicators and designate clear pathways for de-escalation and response, which anticipate and avert the potential for personnel to be injured, and or, damage to business and personal property.”

“They should also review their insurance policies in the event of increasing local unrest activity. Property policies may cover political violence claims in some cases, but insurers offer specialist coverage to mitigate the impact of strikes, riots and civil commotion (SRCC).”

According to the report, the United Nations has warned of the destabilising potential of disrupted supply chains and surging food, fuel and fertiliser prices, particularly in the context of Russia and Ukraine representing about 30 percent of the world’s supply of wheat. “All of this is planting the seeds for political instability and unrest around the globe,” said UN secretary-general, Antonio Guterres in March 2022.

Meanwhile, the risk consulting firm Verisk Maplecroft sees a rise in civil unrest as ‘inevitable, in middle-income countries, which were able to offer social protection during the pandemic but will now find it difficult to maintain that level of spending as the cost-of-living surges.

According to the Verisk Civil Unrest Index Projections1, 75 countries will likely see an increase in protests by late 2022, including the US, Argentina, Brazil, and Spain, resulting in, for example, a higher frequency of unrest and more damage to infrastructure and buildings.

Economic and insured losses from previous protests have been significant, creating significant claims for companies and their insurers.

In 2018, the Yellow Vest movement in France rallied to protest fuel prices and economic inequality, with French retailers losing $1.1bn in revenue in just a few weeks. A year later in Chile, large-scale demonstrations were sparked by an increase in subway fares, leading to insured losses of $3bn.

In the US, the 2020 protests over the death of George Floyd in police custody are estimated to have resulted in over $2bn insured losses, while the South African riots of July 2021, which followed the arrest of a former president, Jacob Zuma, and were fuelled by job lay-offs and economic inequality caused damage worth $1.7bn. Earlier this year in Canada, France and New Zealand demonstrations against Covid-19 restrictions included convoys of vehicles creating disruption across major cities.

The influence of social media networks plays an increasing role in mobilising protesters and intensifying social unrest. “The unifying and galvanizing effect of social media on such protests is not a particularly recent phenomenon, but during the COVID crisis it combined with other potentially inflammatory factors such as political polarisation, anti-vaccination sentiment, and growing mistrust in government to create a perfect storm of discontent,” said Todorovic.

Targets of civil unrest, or collateral damage arising from it, could include government buildings, transport infrastructure, supply chains, retail premises, foreign-owned enterprises, petrol stations, distribution centers for critical goods, and tourism or hospitality businesses.

“The nature of political violence threats is evolving, as some democracies become unstable, and certain autocracies crack down heavily on dissenters. Unrest can occur simultaneously in multiple locations as social media now facilitates the rapid mobilization of protestors. This means large retail chains, for example, could suffer multiple losses in one event at various locations in a country,” Todorovic added.