In today’s Global, volatile geopolitical environment (opens a new window), organisations across the Gulf Cooperation Council (GCC) are increasingly reviewing their insurance strategies, with a particular focus on enhancing political violence (PV) coverage. The rationale is understandable - boards and investors are increasingly calling for broad PV policies that they believe will safeguard their corporate social responsibility (CSR) priorities and, for listed firms, preserve investor confidence and secure capital commitments. Within this mindset is a belief that robust PV protection goes beyond merely addressing potential damages; it demonstrates to stakeholders and analysts a commitment to forward-thinking risk oversight, bolstering corporate governance and market positioning.
An evolving risk profile in the GCC
Yet the actual risk landscape in the GCC is very different to that in other parts of the Middle East and North Africa, Pakistan or certain CIS geographies. Exposures here tend to be infrequent, often limited to isolated incidents rather than large-scale disruptions like strikes, riots, or civil commotion (SRCC). In contrast, some of our neighbouring regions contend with more regular and intense occurrences, from protracted disputes to widespread instability and violent civil and/or political unrest.
The role of PV insurance in the GCC is not to replicate high-risk markets, but to reflect the region’s actual exposures.
This distinction underscores a challenge: an excessive and often unnecessary procurement of PV coverage in lower-exposure GCC settings. Businesses in the GCC frequently pursue all-encompassing policies including everything from terrorism and sabotage through to outright war or internal civil war. One key reason is that these expansive terms were once accessible at negligible expense when it was a buyer’s market. The issue is that a continuation of this approach inflates costs without necessity and strains reinsurance resources and ultimately hinders firms with legitimate high-risk needs in other locations.
Navigating reinsurance market shifts
When markets become more challenging - spurred by geopolitical events such as those in Russia-Ukraine or China-Taiwan - reinsurers face heightened vulnerabilities. During such times, policy restructures or pricing recalibrations become necessary for long-term sustainability. In this environment, the common request in GCC countries for full political violence coverage – including war and civil war at maximum limits for all assets – should be re-examined.
In the specific context of the GCC, a realistic probable maximum loss (PML) analysis should reflect the nuanced nature of PV insurance and in-country risk. Over the past 20 years, PV has matured into a responsive category that is increasingly attuned to shifting hazards. This must remain the case. Within the context of a more challenging insurance market and geopolitical realities, a further differentiated approach is not only adequate but highly recommended.
Advancing informed risk strategies
Within the context of today’s global realities, the time is right for fresh dialogue on GCC vulnerabilities. Such conversations should shift away from routine transactions shaped by past practices, towards a future-focused and differentiated approach. The reality is that organisations that reach for full-peril coverage are very often overlooking the low risk of war or civil war in stable GCC areas like the UAE, Oman, Kuwait, or Bahrain. Clients might, therefore, consider focusing on coverage that matches their actual exposure instead and in turn could provide a more economical cost of insurance.
“If your operations are not in a conflict hotspot, why insure as though they are?”
The job of a trusted insurance broker and risk consultant with deep knowledge of the global and regional PV sector is to empower clients with fact-based choices, delivering analytical perspectives that can lead to bespoke policies. This approach prioritises endurance over curtailment: shielding assets without excess expenditure on unlikely events. After all, if your operations are not in a conflict hotspot, why insure as though they are? Embracing this perspective not only aligns critical sustainability objectives with fiscal prudence but also cultivates lasting adaptability as we face a future of dynamic global challenges.
