Increasing political risk to impact P&C insurance – report
Increasing political risk to impact P&C insurance – report | Insurance Business Canada
Insurance News
Increasing political risk to impact P&C insurance – report
How will the Canadian insurance industry be affected?
Insurance News
By
Jonalyn Cueto and Gia Snape
Political risk and social unrest are anticipated to escalate both in Canada and globally within the next five to 10 years. That’s according to a new report by The Insurance Institute of Canada detailing the impact of the rise of political risk on the nation’s property and casualty (P&C) insurance industry.
The report examined six questions about political risk and social unrest, ranging from the definition and importance of civil unrest for insurers to potential strategies for mitigating political risk exposure.
The projected rise in political unrest encompasses an increase in peaceful protests aimed at pressuring decision-makers to address economic and social justice concerns, such as the rising costs of essentials like food, shelter, and energy, as well as global conflicts, indigenous reconciliation, and climate change.
Alongside these protests, there’s a heightened risk of confrontations leading to property damage, arson, looting, and disruptions, posing challenges for the insurance industry due to potential claims for property damage and business interruptions.
How will political risk impact P&C insurance?
According to the report, recent years have seen notable instances of civil disturbances despite Canada’s history of social cohesion. While Canada generally experiences fewer and less severe disruptions compared to other nations, the risk of property damage and economic disruption remains.
The report cited various factors that are set to fuel social unrest, including widening income disparities, stalled progress on social justice issues, and the ease of mobilizing mass protests, amplified by the internet and social media.
Additionally, global events like the conflict in Ukraine and the COVID-19 pandemic are exacerbating concerns about food and energy costs, supply chain disruptions, and differing viewpoints on public health and climate change responses, all contributing to a climate ripe for political protests.
While Canada has historically managed to address complex issues peacefully, the lack of preparedness highlighted during recent protests underscores the need for improved coordination and response mechanisms across municipal, provincial, and federal authorities.
For the insurance industry, this means preparing for potential increases in claims due to damage, disruption, and delays in addressing other pressing issues important to insurers, such as reforming insurance coverage and mitigating risks from extreme weather events.
The Insurance Institute’s president and CEO, Peter Hohman, highlighted the importance of the report’s findings.
“The Insurance Institute is proud to publish this instalment in a series of reports on emerging issues impacting the property and casualty insurance industry in Canada,” Hohman said.
“These reports offer information and insights to enable insurance organizations to broaden their understanding of how emerging risks will impact the delivery of insurance products and services in Canada over the next 5 to 10 years.”
The report is part of the Insurance Institute’s Emerging Issues Research Series, which aims to spotlight and analyze critical trends affecting Canada’s insurance sector.
Previous reports have explored diverse topics, including cybersecurity, climate change risks, the integration of AI and Big Data, and overarching risk management strategies.
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