Allianz expects rise in strikes, riots, and protests to test business resilience

A new report from Allianz Global Corporate & Security (AGCS) has identified key factors which will continue to fuel the ongoing incidences of strikes, riots, and civil commotion around the world. The global insurer noted that the heightened SRCC risk environment means businesses need to remain vigilant about the different threats which these activities can pose. Besides the likely costs associated with building or asset damage, operations can also be severely disrupted, further resulting in loss of income.

“Incidences of strikes, riots and civil commotion have not only increased in recent years, they are also becoming more intense and catastrophic. These types of events are making our era one of uncertainty,” AGCS head of political violence and hostile environment solutions Srdjan Todorovic said. “We have seen multibillion-dollar loss events in the US, Chile, and Colombia. The threat is changing, and although many of the reasons for it are universal – whether economic, political, or environmental – it can play out differently in different regions, with various levels of violence and disruption.”

“Operational and security management within organizations should view the current climate as a catalyst for evaluating best practices and policies around preparing locations and employees for potential civil unrest and building resilience,” he said.

Risk drivers

The AGCS political violence team’s report highlighted five areas they expect to contribute to the rise of SRCC activity in 2023 and beyond. These are:

Ongoing cost-of-living crisis: The after effects of the rise in inflation are still expected to take their toll in many countries despite actual inflation itself being thought to have peaked. According to the report, just over half of the global protests in 2022 were triggered by economic issues, with public confidence in the financial future left shaken. Half of the countries surveyed in the 2023 Edelman Trust Barometer report showed a year-over-year double-digit decline in the belief that their families will be better off in five years’ time. Further protest activity is likely, both peaceful and violent.

 
Distrust of governments and institutions: Governments perceived to be corrupt, or those who have been in office too long, can bring the activists out in people. Food, fuel, pay, or pension grievances can expand from issues-led demonstrations to wider anti-government movements. 2022 and early 2023 saw protests ignited across the world devoted to such causes, including the rights of women and minorities in Iran, fuel prices in Kazakhstan, economic failures in Sri Lanka, abortion rights in the US, and COVID restrictions in China. Strikes over pay and working conditions continue to plague Europe, while political instability in Peru, Brazil, and Argentina have resulted violent protests.

 
Increasing polarization: Another main factor in creating and stoking tensions across the world is political divisions, usually undermining social cohesion and escalating conflict. Social media continues to be a hotbed for polarized opinions that can become the cause for violent demonstrations. According to AGCS’s report, recent years have seen a big shift to the political left and right in many countries, with fewer and fewer liberal democracies maintaining a sense of balance where political parties compete for the centre ground.

 
Rise in activism: Social media-galvanized movements have continued to rise in recent years, with notable ones including the global Occupy movement against economic inequality, the Black Lives Matter movement highlighting racial inequality, the #MeToo movement against sexual abuse and harassment, and the Stop the Steam campaign, which claimed electoral fraud in the election of US president Joe Biden.

Todorovic said that people can feel a greater sense that their personal values are under attack and will defend them vehemently even in the streets when politics are polarized. “Riots can erupt as a result around a single flashpoint, such as a heavy-handed response by authorities that is deemed unjust,” he said.

These can then escalate across a wider area, with larger numbers of people involved, to become civil commotion. If this spills over into violence and opportunism, businesses can be vulnerable to property damage and looting.

 

Climate and environmental concerns: Governments seen to dial back on climate change progress, such as in the case of fracking or reopening coalmines as a solution to the reliance on Russian gas, mean unrest could be present. Businesses that profit excessively from fossil fuels while many other people struggle could also be the target of such unrest.

 
“Environmental protestors made colorful headlines in 2022 – such as activists pouring soup on a Van Gogh painting or gluing themselves to roads – and will continue to do so in 2023,” AGCS regional practice group leader Etienne Cheret said. “Climate change demonstrations tend not to be violent, but they can be disruptive, particularly if they affect transport infrastructure. We expect this kind of activity to continue, if not escalate, in the coming year.”

Rise of unrest

According to the Verisk Maplecroft Civil Unrest Index, 101 out of 198 countries saw an increase in risk between Q2 and Q3 2022 alone. More than 400 significant anti-government protests have also been lodged since 2017. These factors are what made ‘political risks and violence’ a top 10 peril in the Allianz Risk Barometer in 2023. While it could be noted that the ongoing conflict in Ukraine contributed greatly to this ranking, the results still show that the SRCC’s impact of activity ranks as a political violence risk of top concern with a combined score of almost 70%. Between 2018 and 2023, reported damages from just six civil unrest events around the world resulted in at least $12 billion in economic/insured losses.

Allianz also noted that incidences of civil unrest can be difficult to predict because they often start with a specific trigger such as a change in government, new legislation, or a sudden price rise. Despite this, the global insurer said that there are many things that businesses can do to minimize disruption, starting with a list of technical recommendations, including implementing, regularly testing, and updating a business continuity plan. Specialist insurance can also come in handy against damage from political violence, as can policies that cover civil war, SRCC, terrorism, and war.

Separately, Allianz recently posted its fourth quarter and full-year results, with the global insurer noting higher underwriting and investment results from the property-casualty business segment.

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