Last year saw repeated violence on the streets of Chile, Latin America’s most advanced economy. Though the protests were initially sparked by a government announcement increasing public transport fares, there were clearly wider issues under the surface, in a country with the largest income disparity in the OECD. The turmoil lasted for months, culminating in a recent referendum which has produced an overwhelming majority vote for reform of the country’s constitution. The changes may well prove to be wholesale.
Recent political tensions in Latin America have by no means been confined to Chile. Peru is the latest jurisdiction to have been plunged into crisis, following the ousting of President Marin Vizcarra by the opposition-controlled Congress in an impeachment over allegations of corruption. Many suspected political motives behind his removal, and took to the streets to protest, leading to violent clashes with the police. Following the death of two protestors and the alleged disappearance of many others, Mr Vizcarra’s replacement, Manuel Merino, resigned with his cabinet just five days into the job, leaving the country temporarily with no government at all. On 17 November Peru swore in the centrist Francisco Sagasti, the country’s third President in a week, who it is hoped will bring some stability until the country’s elections in April.
The last twelve months have also seen protests in Bolivia and Honduras, while tensions in Brazil remain high, particularly in response to the Bolsonaro government’s handling of the COVID-19 pandemic. What remains to be seen is the wider and longer-term effect that the pandemic will have on the region. While the virus was relatively late to arrive in Latin America, its impact has been severe, most notably in Brazil, Mexico and Peru, both in terms of human cost and the economic impact. According to IMF figures, Latin American GDP is projected to have fallen by more than 8% in 2020, the worst among the world’s major economic regions.
What is clear is that the risks of political unrest and the associated impact on the insurance market are currently very real, and likely to remain so in the immediate future. Property and political violence policies are most at risk, and frequently give rise to difficult coverage issues, particularly in the intersection between the two classes of business. Was the insured premises the target of political protest, engaging the PV policy, or was this merely theft or malicious damage against a backdrop of social tension, perhaps placing the risk in the property policy? The motivation of assailants is not always as obvious as it seems.
And what of business interruption? In most cases policies will not indemnify for the interruption of businesses caused by civil unrest. What the policy requires is damage to the property in the course of the unrest, and an indemnity will usually be available only for so long as it takes to repair the damage, or would have done so exercising proper despatch. An insured whose property is simply occupied by protestors, without inflicting damage, or whose access is impeded by the protest, may struggle to recover a BI indemnity.
At the reinsurance level, aggregation is often an issue in such cases. Do separate uprisings across the country form part of the same event or occurrence where they are orchestrated in some common political cause? The issue is one that the courts have had to grapple with in the past, including those in England.[1] As always, the precise policy wordings are crucial.
[1] See for example Mann v. Lexington Insurance [2001] 1 Lloyd’s Rep 1
