03 November, 2022 Insurance
On 13 October 2022, Muir Analytics talked to the International Society of Catastrophe Managers at One Liberty Plaza, New York, NY, regarding strike/riot/civil commotion (SRCC) risks and hotel insurance. This article is a synopsis of that briefing.
Broadly paraphrasing Lloyd’s “Recently issued wordings, LMA5553 – Strike, Riot, Civil Commotion and Malicious Acts” – SRCC refers to a group of people engaging in violent, malicious, and/or damaging actions with common intent. These actions include, but are not limited to, lockouts, work stoppages, violent protests, violating the public peace, riots, brawls, group vandalism, and looting. Some SRCC incidents are small and fleeting. Others are large and lingering.
As Muir Analytics explained in a briefing to Lloyd’s Terrorism and Political Violence Panel in May 2021, incidents of SRCC around the world have taken off like wildfire. Since 2016, there have been over 100 major acts of SRCC, and in the 2020-21-time frame, there were over 20 significant ongoing SRCCs, globally. This trend has continued in 2022, and Muir predicts the same for 2023.
Why has this happened? There are two broad reasons.
First, advances in communication technology have allowed information to spread globally and at “the speed of now.” The Internet, computers, and smartphones enable legitimate and illegitimate information to proliferate instantaneously worldwide. This information includes real news, fake news, lifesaving threat warnings about natural disasters, and both helpful and harmful political and religious narratives. Such information proliferation has had a decisive impact on peoples’ social, political, and religious standings, especially when it’s terrible news – fake or real. In short, people nowadays can get “fired up” over issues more quickly than in the past.
Second, the technology mentioned above also enables people to connect, organize, gather, and turn into activists at “the speed of now.” For example, people “fired up” about a police shooting can send text messages to hundreds of others regarding why to protest, where to protest, and what time to protest. These hundreds can text hundreds more, and a protest message can reach thousands very quickly. Protesters incensed over issues – especially boiling issues like police shootings, long-term economic inequality, government mistreatment, and high fuel prices – can turn violent with little warning. Moreover, professional activists, especially agitators who believe violence is a valuable tool, are experts at proselytizing, organizing, and deploying to the streets. They increase the probability of protests turning violent.
Hotels are the world’s most violent commercial sector. In the US, Muir Analytics tracks between 30-60+ acts of hotel violence every month. Sometimes, it’s 70+ a month. Internationally, it’s 20-40 every month. Risk categories include violent crime, terrorism, war, and, of course, SRCC. Peril categories include fist fights, blunt instrument attacks, stabbings, shootings, bombings, raids (like the Mumbai attacks of 2008,) missile strikes, artillery bombardments, and mob violence from SRCC.
There are an estimated 500,000 hotels in the world. They are the backbone of global tourism and are critical for international business. Because of violence, however, hotels can be risky to insure, especially when using legacy underwriting strategies. Hotel violence data can fix this problem and make hotel violence insurance effective for the policyholder and the carrier.
Currently, Muir’s SecureHotel Threat Portal database contains over 2,457 cases of hotel violence. And this database grows weekly. A select slice of that data from an undisclosed timeline reveals that over 200 SRCC hotel cases have impacted over 300 properties worldwide.
The reasons for hotel SRCC vary. It results from politics, religion, socio-economics, ethnic issues, and personal disputes. Sometimes, violent mobs target hotels because they symbolize wealth and power. Other times, rioters lash out at a hotel owner’s political, ethnic, or religious affiliation. Frequently, a VIP or an event at the hotel is the target. And often, a city or national government is the target, and hotels are just victims of circumstance or proximity. Also, personal disputes can cause guest vs. guest violence, such as group fights and massive brawls.
The scale of hotel SRCC destruction varies as well. Some large-scale SRCC incidents cause no physical damage to hotels but instead cause massive revenue losses. Other SRCC flare-ups cause medium physical and financial damages. Others cause total loss events, serious injuries, and loss of life.
A select global geographic spread (timeline redacted) of hotel SRCC incidents is:
The sub-regional spread from the above select slice of data is:
The top 10 country spread from the above select sample is:
More than 35 other countries are on Muir’s SRCC hotel impact list.
Hotel SRCC case studies are critical to understanding the context behind these sample statistics. This is especially true for underwriters when developing the conditions sections of SRCC insurance policies. It also helps hotel risk managers comprehend what might happen to their properties in the event of SRCC.
US hotel SRCC has come overwhelmingly from far-left activism. This does not mean US far-right activists are not violent. They are. So far, they just have not applied violence against hotels at the level the far left has. This could change, however. For details on far-left and far-right hotel violence, read this (see the US hotel violence section.)
Regarding BLM-associated hotel SRCC, in 2020, violent agitators took over peaceful George Floyd/BLM protests in various cities. The result was widespread property damage – over $1 billion worth – multiple injuries, and some deaths. Rioters all over the country targeted hotels, including, but not limited to, the following high-end properties:
Damages in most of these cases were light but not cheap. For example, rioters at the Hotel Bennet smashed the front door’s ornate windows, spraypainted the outside of the building, and assaulted the general manager in the parking garage as guests huddled in fear in a makeshift secure room on the sixth floor. But there was more serious violence. Rioters in Washington, DC, for example, committed arson against the Hay Adams. The property might have burned down and suffered multiple casualties if hotel staffers and the fire department had not acted swiftly.
Egypt’s most recent and pronounced hotel SRCC resulted from two pivotal political episodes:
The 2011 riots included police firing tear gas directly at the Ramses Hilton, where protesters had gathered. Hotel guests watched the mayhem from their balconies, but not for too long. Noxious tear gas fumes inundated the hotel, and protesters stormed the lobby, causing fear and panic among guests and staff. At the Cairo Marriott Hotel & Omar Khayyam Casino, journalists, guests, and staffers were trapped inside for a prolonged period because roving gangs armed with knives, sticks, and firearms circled the property.
The 2013 riots impacted several hotels, including the Semiramis InterContinental Hotel. Rioters directly attacked the property with pistols and shotguns. They broke through the hotel’s security shutters and trashed the lobby, the casino, luxury stores, three floors of restaurants, and a bank branch.
In France, the Yellow Vest riots of November-December 2018 inflicted minimal physical damages on hotels, but their revenue losses were exceedingly high. In this case, rioters gathered on multiple streets in the heart of Paris’ tourism areas. Street battles with police included tear gas, flashbang grenades, hand-thrown missiles, and water cannons. The chaos impacted all types of hotels, ranging from budget to five-star properties. Five monied hotels that suffered lost revenues included, but were not limited to:
These riots caused 35,000 overnight hotel cancelations. This number does not include cancelations later in December and the following months when reservations fell by at least 25%. Hotel revenue losses as of December 2018 were $20.43 million. Six-month losses were undoubtedly higher.
In Thailand, “Red Shirt” protesters, angry over the 2006 coup against PM Thaksin Shinawatra and perceived equality issues, took over Bangkok’s central business and tourism district in April-May 2010. There, the Red Shirts built an armed camp and then had sporadic, running battles with the Thai Army’s containment forces. The violence included standard riot/anti-riot fare: Hand-thrown missiles, slingshot projectiles, Molotov cocktails, smoke bombs, flashbang grenades, burning tires, tear gas, and the like. There was also occasional sniper fire, automatic weapons fire, and grenade explosions. The chaos paralyzed tourism, large and small businesses, restaurants, and hotels.
These riots impacted at least 25 hotels, most indirectly, but they all had a front-row seat to the bedlam. In one outlier case, however, gunmen peppered the Dusit Thani Bangkok with automatic weapons fire and 40mm grenades. The latter caused a fire and moderate damage to the hotel’s interior as guests sheltered in the basement. Five higher-end Bangkok hotels that were impacted included:
Eventually, the Thai Army assaulted the Red Shirt camp with armored personnel carriers. The fleeing rioters set fire to several buildings in Bangkok. No hotels were impacted by these arson attacks, however.
All hotels near the Bangkok riots lost two full months of revenue. The shock of the turmoil spoiled Thailand’s otherwise excellent tourism reputation and chased away business travelers and holidaymakers for at least six months, further hurting hotel revenues.
In June-July 2020 in Ethiopia, ethnic friction between Oromo and non-Oromo peoples boiled over when assassins murdered Oromo singer, songwriter, and civil rights activist Haccaaluu Hundessas. This killing triggered Oromo riots across multiple towns against non-Oromo businesses and people. At least 239 were killed, over 200 were injured, and police arrested 3,500. Rioters burned at least 12 hotels to the ground.
Haile Resorts, owned by famous athlete Haile Gebrselassie, were specifically targeted. Rioters torched the Shashemene Hotel, a 3-star property, which was consumed in fire – a total loss event. They also attacked the Haile Resort-Ziway, another 3-star property. Protesters partially burned the hotel and ransacked its interior. They smashed windows and destroyed the gym, the hotel store, the laundry room, and the kitchen. Only the structure of the hotel’s several buildings was left. Altogether, the Oromo riots put 400 Haile Resorts employees out of work and caused $8-11 million in damages.
Lloyds of London’s Blueprint One, a strategic guidance document published in fall 2019, made it clear: The specialty insurance market – specifically, the London Market (LM) – must use data and technology to improve its legacy way of doing business or perish. One reason for using more data, said Lloyd’s, is to increase understanding of complex risks. Complex risks include violence – things like terrorism, political violence, war, and SRCC.
While innovation is undoubtedly occurring, top insurers at a London insurance conference on 28 April 2022 said the LM’s adoption of data was far too slow.
So, what are some potential solutions? From the hotel violence perspective, using hotel SRCC risk data to improve hotel specialty insurance coverage should adhere to the following method:
Concerning point 1, the data must be high quality and plentiful. It also must reflect long-term trends. Trends are telling. A handful of case studies are less so.
Concerning point 2, global and country-specific hotel SRCC trends can be combined to produce an informative hotel SRCC country profile, complete with both definitive and speculative risks. This blending is necessary because while global SRCC trends are highly informative, each country has its own SRCC profile or “SRCC fingerprint.” That “fingerprint” is essential for the underwriter to fully understand the complex SRCC risk picture in different countries.
Concerning point 3, a heightened understanding of hotel SRCC trends sets up the underwriter for success from a strategic and technical point of view. Regarding strategy, the underwriter can better match risks to capital, generate new off-the-shelf policies, create drag-and-drop coverage language to create modular policies, or get creative and produce 100% customized policies. Captives, parametric coverage, layering, 1st come/1st serve pools, and insurance on demand can all be considered based on this data. From a technical point of view, underwriters can create a new set of hotel SRCC language, exclusions, and conditions. Modeling, claims/adjuster validation, and tying the policyholder to SRCC risk mitigation efforts as coverage requirements are all valid, data-backed tactics to apply here.
Underwriters can also create copious new products based on this kind of data. For example, coverage could be based on specific types of broad SRCC trigger issues, such as election seasons or legislative sessions that are known to be tackling controversial subjects. Coverage could also be tied to specific, real-world ideological drivers, such as, but not limited to, US BLM-related violence, US ultra-left or ultra-right-wing violence, Egyptian or Thai political friction, specific Ethiopian ethnic troubles, and the like. The key factor in these examples is that the SRCC ideological drivers have been documented and analyzed. They can be harnessed to create new, highly customized insurance products.
Two final points: First, using SRCC data, underwriters, possibly with help from brokers, can integrate customers into the insurance lifecycle via educational sessions on the triggers, risks, perils, and damages. This will enhance customer engagement, clarify policies, and cause repeat business.
Second, the SRCC risk prediction cycle stretches too far out into the future in many cases. A sixth-month or quarterly prediction cycle would be more realistic. This means six-month or quarterly policies should be considered as well.
For all these approaches, hotel SRCC data trends show the way forward. Without it, innovation is impossible.
It is clear that hotel SRCC data can be used to help underwriters do a better job of covering hotels for this globally intensifying risk. If one has an excellent grasp of the risks based on niche data, one can engage in superior risk management. Otherwise, one is just throwing darts in the dark. Data helps underwriters fully understand the risks and illuminates the vast array of new products that can cover them.
Additionally, the same hotel violence data that helps underwriters can help brokers, hotel risk managers, and hotel security managers. Brokers can better link hotel customers to the right underwriters, advocate for policyholders, put together captives, and better layer deals that seek the best balance of financial risk between carriers and reinsurers. Hotel risk managers can ask brokers and underwriters for the exact violence coverages they need for their specific properties. Hotel security managers can enact intelligence-driven security, crisis management plans, staff training, and more.
Ultimately, having underwriters and hotel clients use the same trend data can be a force multiplier in SRCC risk reduction and other forms of violence. This means better-protected guests, staffers, and buildings. And all this means better-protected hotel revenues and brand names, fewer negligence lawsuits, and fewer insurance payouts.
The question now is, will hotel companies and underwriters adopt such lifesaving and revenue-protecting data? Will they both modernize their approaches to risk mitigation? With SRCC and other violence on the rise, it seems they cannot afford to say no.
Muir Analytics runs the world’s largest, most sophisticated hotel violence database – the SecureHotel Threat Portal – with over 2,400 hotel attacks (and growing.) We can provide the hospitality sector with intelligence that facilitates full-spectrum risk reduction, which helps hotels protect guests, staff, buildings, brands, and revenues. Contact us for a consultation: 1-833-DATA-444.
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