Engineering underwriters face new risks due to unrest
Engineering underwriters are being exposed to new and more complex risks due to rising political and economic unrest across the world, according to the International Association of Engineering Insurers (IMIA).
The association said in a new report that incidents of strike, riot and civil commotion (SRCC) have grown significantly over the last five years in both developed and developing regions of the world.
It found that the number riots globally since 2010 is already more than double the number that occurred between 2000 and 2010.
IMIA said that large engineering projects have a greater vulnerability to the risk due to their potential to expose or become a focal point for contentious social, economic and environmental issues.
It claimed that investor-driven nature of modern construction projects has heightened the demand for insurance products, but it says that while companies are increasingly looking to extend their coverage to include SRCC, understanding this unpredictable risk is a challenge for engineering underwriters.
“In a world of uncertainty, how can one assess the volatility of human nature, estimate the triggering factors which can cause an outburst of social instability; and all this throughout a project’s lifespan which may last for several years?” said IMIA.
Speaking at IMIA’s annual conference in Mexico where the report was launched, the author of the report, Dieter Spaar, chairman of IMIA’s SRCC working group, added: “Engineering underwriters are typically used to dealing with tangible risks grounded in facts, so getting to grips with something that is inherently unpredictable and based on human factors is understandably out of their comfort zone.
“However, with clients increasingly looking to include it in their cover, we would urge them to get a better understanding of the drivers of this risk.”
The report is aiming to raise awareness for SRCC risk, and gives advice for achieving best practice in underwriting the peril, including guidance on assessing the nature of the risk, wording examples, legal definitions and factors to consider when managing a loss.
Spaar added: “Engineering underwriters are often being asked to include additional clauses which are sometimes presented as not increasing the actual exposure of the project. The reality is actually more complex and we hope this paper will help improve understanding of the many and varying factors involved so that both insurers and customers can ensure they have the best possible coverage in place.”
