Reinsurance burden likely to rise due to Bangladesh political unrest

Insurance companies may face increased reinsurance inward placement rates due to the ongoing volatile situation in Bangladesh. The expected rise in strikes, riots, and civil commotion (SRCC) claims is driving this potential increase. "SRCC as a peril might see rate increases due to political violence. More critically, we may see some territories losing coverage altogether for political violence," said GIC Re MD Ramaswamy Narayanan. "We do write Bangladesh as a territory, but most of our treaties exclude SRCC and political violence. Only one contract includes SRCC, so we don't expect significant losses from Bangladesh."

Narayanan expects a reduction in capacity.

"Generally, SRCC is excluded, but in this case, given the location, we agreed to cover it," he explained. "Most government buildings are self-insured, so we do not expect losses from those." In recent years, SRCC events have surged, becoming a prominent risk for the insurance industry.


"Events in Bangladesh, Israel, and Iran are causing concern globally. While prices may rise, the more significant issue is the reduction in coverage capacity. Catastrophic rates might be higher in Bangladesh due to expected losses," Narayanan said. "Rates go up where risks are poorly managed or frequent losses occur."

Insurers have been seeing substantial increases in insured losses from events like the French riots in 2023, the Black Lives Matter movement in 2020, and the Hong Kong riots in 2019. In 2023, French riots caused ₹730 million in insured losses. Over the past two decades, SRCC claims have increased by 3,000% globally, according to a blog on Swiss Re. Mohit Pande, chief underwriting officer, Property, wrote that in many regions, SRCC is mandatory coverage and a critical part of the risk spectrum the insurance industry must address.

These geopolitical conditions are leading to insurance rates rising, insurers reviewing terms and conditions. "The Russia-Ukraine war, the flare-up of tensions between Israel and Hamas, and recent global civil unrest have led to greater awareness of the associated risks, leading to significant shifts in the political violence insurance marketplace," said a Marsh report published in December 2023. "Rates are rising, limits are increasingly challenged, terms and conditions are being reviewed, and in some territories-including Russia, Ukraine, Moldova, Belarus, Israel, and Taiwan-sanction and treaty restrictions mean insurers are now unable or reluctant to offer cover."