IQUW enhances SRCC risk modelling amid rising civil unrest and shifting reinsurance market

In a Reinsurance News interview, IQUW—a property and specialty re/insurance business—shared insights into how SRCC (strikes, riots, and civil commotion) risks are evolving and how the industry is adapting.

Speaking on behalf of the company were Kate Hughes, Underwriter for Political Violence & Terrorism and War, and Matt Hopwood, Man-Made Catastrophe Research Analyst.

Kate Hughes explained that since 2019, the frequency and severity of civil unrest events have increased, referencing the Chilean protests, the George Floyd demonstrations, and the unrest in South Africa as examples.

“Key drivers include growing economic inequality, widespread insecurity, and an increasingly fragile geopolitical landscape,” she said.

She also pointed out the role of social media in intensifying these movements by amplifying grievances and mobilising public action more rapidly than in the past.

This shift has had a significant impact on the insurance and reinsurance markets. “Following significant losses from riots and demonstrations in Chile and South Africa, coupled with war losses in Ukraine and Russia, reinsurance costs for the political violence and terrorism (PVT) market surged in 2023,” said Hughes.

These increased costs led to higher premiums across many territories and reduced capacity in areas like South America and South Africa, making coverage harder to secure.

More recently, however, conditions have started to stabilise. “There has been less significant SRCC activity in these territories and several new entrants into the PVT market. This increase in competition, combined with a lower perceived risk, has led to a decline in rates, returning to, or in some cases falling below, pre-2022/23 level,” Hughes added.

Matt Hopwood explained why SRCC risk is particularly difficult to model. “SRCC is inherently difficult to model because it involves human behaviour, which is highly unpredictable and does not follow fixed physical laws like natural catastrophes.”

He noted that many modelling methods rely on basic scenario-building or broad estimates of potential loss. Because SRCC events are often driven by specific social or political grievances and influenced by local geography, they can be highly localised and variable.

“Events like urban protests or mass gatherings can have cascading impacts, from property damage to business interruption, and a slight shift in a crowd’s location, for example towards a transit centre or retail hub, can transform the nature and quantum of the loss,” he said.

To address this challenge, IQUW has been investing in innovative modelling tools, particularly those that can simulate how unrest spreads.

“By simulating stochastically how a crowd may spread during an SRCC event, it enables underwriters to pinpoint high-risk areas, identify vulnerable buildings, groups of potential target buildings, and run tailored analyses of potential unrest,” Hopwood explained.

He described IQUW’s own crowd modelling tool, which focuses on severity and integrates with other vendor models to create a more detailed picture of risk. “It feeds into our underwriting by approximating crowd footprint areas, identifying buildings at risk, and adjusting parameters such as crowd size and location to model ‘what if’ scenarios.”

Using the Capitol Riots as an example, Hopwood said they combined road network data with protest locations to assess potential spread and impact.

“This exercise enabled us to better understand our overall exposure over a broader area, and to explore potential exposure in a variety of scenarios had the event unfolded differently.”

Hopwood added that this new framework is a step toward a more probabilistic approach to modelling SRCC. It allows underwriters to simulate unrest scenarios and see how exposure might change under different conditions, improving accumulation management and supporting more precise, risk-based pricing.

Hughes noted that despite regional shifts, demand for SRCC coverage remains high. “With many regions experiencing mounting cost-of-living pressures and widespread dissatisfaction with government performance, this coverage has become essential to providing peace of mind for businesses concerned about potential disruptions.”

The modelling tools IQUW is developing help the company manage exposure effectively as it expands its portfolio to meet this demand.

Looking to the future, Hopwood said SRCC modelling will continue to develop as more data becomes available. While advanced techniques exist, such as using continuum models on a macro scale, he believes they’re unlikely to become standard due to high computational requirements and limited expertise in the field.

“There aren’t many applied mathematicians floating around the industry with that level of expertise,” he said. More accessible approaches, such as applying probability distributions to geographic footprints and validating them post-event, offer a practical path forward.

“You have the buildings, you may have some metadata, and you can ascribe a probability distribution and then validate it after the events have occurred, continuously using data to improve and enhance the modelling.”

Through initiatives like these, IQUW is positioning itself at the forefront of data-informed underwriting in complex risk areas, helping clients navigate an increasingly uncertain risk environment.