Managing Agency Partners (MAP) Underwriting, one of Lloyd’s newest syndicates, has come up with an innovative and timely policy aimed at protecting investors from losses caused by wars and political violence in troubled areas like the Middle East. The risks covered include perils of all kinds—wars, insurrections, strikes, riots, terrorist acts, etc.—but the underwriters are actually aiming to cover an investor’s possible economic losses in dangerous areas.
“In fact the coverage is aimed mainly at reassuring investors in Israel,” said Ben Garston, political risk underwriter at MAP, who originated the idea following a recent business trip there. “While coverage would be available elsewhere, Israel is the primary market, as it has a well-developed high technology sector, which depends on foreign investment, and is therefore quite vulnerable.”
The current political conflict between Israel and the Palestinians has raised investors’ fears about the safety of their property and personnel. “It is clear that Israel has a great economic potential, but investors are understandably worried about the political situation,” Garston said. Loss exposure from terrorism discourages investment and raises its cost.
“Investors Political Violence Insurance” is designed to supplement a company’s existing coverage. According to a company announcement: “It combines a number of covers that would normally be excluded from standard insurance—especially those losses arising from acts of war. The four major areas covered are: 1) physical damage to insured tangible assets; 2) forced abandonment; 3) personal accident, and 4) evacuation expenses.”
In discussing the applicability of the new policy, MAP stated that: “Where the cause of loss is war, riot, terrorism or civil unrest, cover is offered for loss of physical assets, loss of equity due to abandonment, repatriation costs for expatriate employees and their families and belongings, and for personal accident. Extensions are available for a company’s liability for injury (including employee injury) as a result of war and terrorism, and even fixed compensation redundancy insurance for employees, following abandonment of operations.”
“In the current climate,” Garston exp-lained, “it’s quite possible that a factory would have to be abandoned or shut down, or that threats of violence would force people to leave. This policy is intended to take away much of that political uncertainty, and so enable businessmen to concentrate on more mainstream commercial considerations.”
While the current political impasse is making headlines, other possibilities darken the picture and cause further concerns. “Syria and Iraq are both capable of trying to take advantage of the situation,” Garston said, “and while an all-out war is possible, a more likely scenario would be increasing threats leading to confrontation and further mobilization of Israel’s forces. MAP’s policy would mitigate the resulting economic losses.”
Some aspects of the policy resemble provisions covering extortion, in that no physical harm need actually occur, only threats. Highly developed industries in troubled areas are particularly vulnerable to this type of economic intimidation.
The availability of this type of coverage should be welcome news for a number of California’s high tech companies, as they are a major source of investment in Israel.
MAP, which formally began operations last November, is the largest new syndicate at Lloyd’s. Aidan Kong, who handles property risks, said, “We’ve already placed more than £110 million [$157 million] in insurance and reinsurance.”