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Dateline: Hong Kong, Jakarta, Santiago, Lima, Quito, La Paz, Paris, Barcelona, Beirut, Baghdad ….
“Thousands of demonstrators took to the streets again today in what has become an ongoing series of protests against ….”

There’s something happening here

 The news reports from virtually every corner of the globe have been similar in recent months as citizen protests unfold, often quickly and spontaneously, in response to perceived “heavy-handed” actions by a local or national government. In many instances, these rebellions also are relatively unorganized – that is, lacking recognized leaders or the support of an opposition party – and thus catch the governments off-guard.

The world has been transfixed, for instance, as hundreds of thousands of – and in some cases, more than one million – people have taken to the streets in Hong Kong in an ongoing series of protests against, among other concerns, legislative proposals that citizens fear would undermine the region’s autonomy and citizens’ civil liberties. Meanwhile, in Santiago, Chile, a hike in transit fares prompted mass protests that led to, among other things, the 2019 UN Climate Change Conference being relocated to Madrid. The Ecuadoran government’s plan to scrap fuel subsidies was the catalyst for strikes and demonstrations in Quito; likewise, increased fuel taxes were the impetus for the “yellow vest” movement that erupted in Paris and other French cities. In Beirut, a new tax on WhatsApp phone calls led to massive anti-government demonstrations.

Although everyday financial concerns sparked many of these events, they share a common backdrop characterized by slowing economic growth, ever-widening income inequality and a growing perception that political and economic institutions are increasingly deaf to the needs and aspirations of the citizenry.

In its October 2019 World Economic Outlook, for instance, the IMF reports:

“Over the past year, global growth has fallen sharply. Among advanced economies, the weakening has been broad-based, affecting major economies (the United States and especially the euro area) and smaller Asian advanced economies. The slowdown in activity has been even more pronounced across emerging market and developing economies, including Brazil, China, India, Mexico, and Russia, as well as a few economies suffering macroeconomic and financial stress”.

As growth slows, income-inequality issues that have been simmering below the surface are starting to emerge. Chile, for instance, has long been more stable and prosperous than many of its neighbours. It also has the highest level of post-tax income inequality among OECD countries. As a professor at the University of Chile said, “(The protests) had little to do with public transit. It became a situation of brutal inequality”.

Likewise, while people in Lebanon were incensed by the tax on WhatsApp calls, they also made a connection between the USD 16 million the prime minister paid a South African model he met at a resort in Seychelles and why the government couldn’t respond to devastating wildfires after eliminating virtually all funding for firefighting crews and equipment.

These and similar developments suggest that the social contract – always a fragile concept – is fraying badly in many countries. Consequently, in more and more places, residents are starting to express their frustrations by employing a blunt, potentially powerful tool: taking to the streets en masse in an effort to reassert control. Or as a sign carried by a demonstrator in Beirut proclaimed, “The power of the people is stronger than the people in power”.

Here to stay?

Mass protests, of course, are hardly a recent phenomenon. However, for businesses seeking new markets and investors looking for new opportunities, this current wave of unrest is unsettling, to say the least. That’s particularly the case as civil strife breaks out not only in such historically volatile countries as Iraq and Lebanon but also in locales like Hong Kong and Chile, places long viewed as politically progressive and economically stable.

Moreover, experts agree that civil strife is likely to be a prominent feature in the risk landscape for the foreseeable future. In fact, the 2019 AXA-Eurasia Group Future Risks Report found that “social discontent and local conflicts” was the fourth most significant emerging risk facing the world today, a jump from its fifth-place ranking in 2018; climate change, cybersecurity and geopolitical instability occupied the top three spots in 2019.

(The Future Risks Report is based on a survey of more than 1,700 insurance and risk management professionals including internal experts, corporate risk managers, brokers, academic researchers and experts with risk and security backgrounds. The respondents live in 58 countries in all parts of the world.)

According to the Report, “Almost half of all surveyed experts consider income gap and wealth disparities to be the most worrisome concern”. Or as one respondent, a finance executive from the Czech Republic, put it, “While most emerging threats are at least recognized, the threat posed by income inequality and eroding social welfare programs is an unaddressed ticking time bomb”.

Proactive risk management is essential

In the interval between writing and publishing this article, the civil unrest and violence in some of the places noted here doubtless will have escalated, creating even greater instability. Meanwhile, some semblance of normality may have returned elsewhere, while people in other lands are now taking to the streets. In other words, this current wave of social unrest may ebb and flow in the future but is unlikely to subside significantly.

The authors of the Future Risks Report also noted:

“One of the major trends apparent in the survey is the increasing interconnection between risks and their ensuing ripple effects … Surveyed experts thereby argue that a siloed approach – that is, risk management that focuses on single risks only – is insufficient … Proactive risk management must take into account the complexity and inherent uncertainty of emerging risks. To achieve this ambitious objective, a constant dialogue between experts from different disciplines and fields is needed”.

From my vantage point underwriting political risk and trade credit insurance, I think this aptly summarizes issues and imperatives facing companies and investors today. Decisions involving new opportunities or existing operations/investments can’t avoid the “complexity and inherent uncertainty” of the current risk landscape.

Moreover, while different types of indemnity insurance can help mitigate many risks – and may indeed be a precondition for financing – transferring risk via insurance should not be the first port of call . More importantly, proactive risk management involves developing a deep understanding of the varied dynamics at play in a country, including the historical background, competing interests and potential flashpoints. As Ian Bremmer, the founder and president of the Eurasia Group, puts it:

“Political risk analysis is more subjective than its economic counterpart and demands that leaders grapple not just with broad, easily observable trends but also with nuances of society and even quirks of personality. And those hard-to-quantify factors must constantly be pieced into an ongoing narrative within historical and regional contexts”.

In summary, in an increasingly volatile and economically interconnected world, political risk is becoming more frequent and severe. This unfortunate trend only reinforces the importance of proactive risk management and appropriate risk mitigation to help companies and investors better navigate the turbulence.

About the author: Bonnie Chow is a Senior Underwriter for AXA XL based in Sydney. She works with commercial clients and financial institutions in Australia and across the Asia-Pacific region to structure political risk and trade credit solutions tailored to their specific needs and commercial requirements. She can be reached at


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