Insurers’ response to riots in Chile reflects a broader trend

The riots that broke out in Chile in 2019 have prompted insurers to change their underwriting approach to strikes, riots and civil commotion (SRCC) in the country, explicitly excluding the protection from property policies and creating a market for a standalone cover. The move reflects a broader market trend.

Between October 2019 and March 2020, the riots caused severe economic damage and created the largest insurance industry loss in the country since the last Chilean earthquake. They have been triggered by a hike in metro fares while Chileans were frustrated about rising living costs, low wages and inequality. The riots quickly spiralled into mass protests, arson and looting. 

Insured losses are expected to reach US$3 billion (opens a new window), including a US$900 million to US$1 billion hit (opens a new window) to the retail sector. Reinsurers were taken aback by the level of losses they had to shoulder through catastrophe programmes. Data provider PCS believes that the facultative reinsurance losses affecting the retail sector alone could range from US$700 million to US$1 billion (opens a new window). Reinsurance catastrophe programmes did not explicitly exclude man-made risks in treaties with primary insurers. This has now changed.

Since October 2019, property insurers exclude or sublimit SRCC in Chile. The cover is only available in the reinsurance market (London and regional market) with one local exception. For insurance buyers this has also meant that it was necessary to address potential gaps between the wording of property insurance arrangements and SRCC standalone policies. Chile is not an isolated case.

Global rise in civil unrest

Events of social unrest have become more frequent recently worldwide. Data from the 2020 Global Peace Index (opens a new window) shows that civil unrest has doubled over the last decade. Examples of recent events include the Gilets Jaunes protests in France (2018), anti-government protests in Hong Kong (2019), police brutality protests in the US (2020), tax proposal protests in Colombia (2021), and Zuma arrest protests in South Africa (2021).

The pandemic has accelerated this trend. Civil unrest increased globally by 10% (opens a new window) during 2020, driven mainly by rising uncertainty and unease caused by lockdowns and COVID-19 restrictions and worsening tensions from economic instability.

Among the underlying drivers for the rise of civil commotion events are stagnating incomes, growing income inequality, corruption, the loss of faith in established elites, and the erosion of civil and political rights. COVID-19 has in many countries aggravated democratic backsliding, corruption and economic inequality. 

The increasing frequency of such events and associated insured losses is forcing insurers to reassess their underwriting approach to SRCC, not least because these disruptive events have been seen across many regions including those that are traditionally stable. This is driving a fundamental change in the property market as insurers adjust their underwriting approach to risks related to SRCC. It is important to note that civil commotion can erupt very suddenly and unexpectedly, making such events difficult to predict. Similarly to Chile there is a general trend towards tightening the terms for standard property cover and excluding damage and disruption related to SRCC risks from it. 

Underwriters do differentiate between industry sectors, location and security to determine the risk exposure of corporations. Businesses may be considered higher risk if they are located in city centres and handle high-profit goods or are seen as government supporters as they are more likely to attract looters. 

However, there is another decisive factor determining the rates for SRCC. Because such events are unpredictable, rates may remain fairly stable for long periods, but then shoot up dramatically when an event like the one in Chile happens. The good news is that the insurance market is remarkable efficient and dynamic and can adjust quickly to the benefit of insurance buyers. In the case of Chile for example, prices came down again remarkably quickly following the riots as capacity increased and new players entered the market. In 2021, premium for SRCC reduced over 30% vs 2019-2020. 


  • Start the renewal process for property and casualty policies early as it may take longer and require more information than in the past to achieve the optimal solutions.

  • Have a risk mitigation plan in place for SRCC events. Organizations may want to reassess their physical security measures to determine whether these are still appropriate in light of a potentially changed risk exposure. This may also help in negotiations ahead of renewals as it may make the risk more attractive to insurers.

  • Pay particular attention to any exclusionary language to ensure that the cover is appropriate for your risk appetite and any gaps between the property cover and a standalone SRCC protection.

  • Similarly, make sure you understand the terms and conditions of the cover as these define how the contract may respond to different events, such as loss of access and attraction, physical property damage, or disruptions to the supply chain, reputation, or impact on employees. A clear understanding of the policy’s response in different situations is crucial to avoid disputes and delays in claims payments following an event. 

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