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Super election year increases risks of political violence, warns Allianz

Super election year increases risks of political violence, warns Allianz
24-04-24 / Tommy Jackson

Super election year increases risks of political violence, warns Allianz

Munich - With an unprecedented 'super-cycle' of elections in 2024, almost half the world's populations will go to the polls before the year is out. According to a new report from Allianz Commercial, security is a concern in many territories, not only from the threat of localized unrest but because of the wider-reaching consequences of electoral outcomes on foreign policy, trade relations, and supply chains.

The headline election will be in the US in November, when a narrow result could inflame existing tensions. The European Parliament elections in June could also deepen divisions, if radical-right parties gain votes and seats. As unrest can now spread more quickly and widely, thanks in part to social media, financial costs from such events for companies and insurers are mounting. Economic and insured losses from just seven civil unrest incidents in recent years cost approximately US$13bn. With the threat of terrorism also on the rise, and the prospect of greater disruption from environmental activists occurring, businesses will face even more challenges in the next few years and will need to anticipate as well as mitigate evolving risks with robust business continuity planning.

"So many elections in one year raise concerns about the fueling of polarization, with tensions potentially playing out in heightened civil unrest. Polarization and unrest within societies are fueled by fear. They undermine trust in institutions and challenge people's sense of a common purpose built on shared values," says Srdjan Todorovic, Head of Political Violence and Hostile Environment Solutions at Allianz Commercial. "We also expect to see increased unrest around environmental issues in future, not only from activists, but from those who are pushing back against government climate mitigation policies."

All eyes on elections in the US and the EU

The US presidential election in November is likely to be a close call, with the outcome depending on results in a handful of states. A recent poll shows that more than one third of Americans believe President Biden's election win in 2020 was not legitimate. Widespread disaffection among voters could be exploited by misinformation created by artificial intelligence and spread via social media. Deepfakes, disinformation and repurposed imagery, as well as customized messaging, could galvanize unrest or influence small but potentially decisive parts of electorates.

Many commentators have predicted that European Union elections in June could see a number of states politically shift to the right, with the potential for populist or far-right parties to gain votes and seats, building on a trend seen in 2023. Any success for these parties across Europe could result in growing opposition to EU environmental, immigration and human rights policies.

"The impacts of a political shift to the right and subsequent policy changes endure long after a political party's term in office," Todorovic adds. "They fundamentally change societies and public attitudes and make the next electoral shift to the center or left seem drastic, creating the potential for schisms and potentially violent responses from those who feel underrepresented by a regime change."

Elections in Africa pose challenges and opportunities for political stability

The African continent has also hit geopolitical risk headlines in recent years and 2023 was no different, with Niger and Gabon experiencing coups. In Sudan, a civil war has led to the displacement of eight million people, including six million within the country – the largest internal displacement crisis in the world.

The year 2024 sees many African countries scheduled to have elections. The large scale of elections poses both challenges and opportunities for the continent's political stability. Most of the elections will be in Southern Africa including Botswana, Mauritius, Mozambique, Namibia, and South Africa. West Africa will hold the second most in Burkina Faso, Ghana, Guinea Bissau, and Mali. In North Africa, Mauritania, Algeria, Libya, and Tunisia are set to host elections. Ethiopia, Somalia, and South Sudan, Chad, and Rwanda in Central and Eastern Africa are scheduled to cast votes.

The South African elections in May are a potential flashpoint. Polls indicate votes for the ruling African National Congress (ANC) could dip below 50%, forcing it into a coalition – a first at the national level – after being in power for 30 years. "South Africa suffers from high unemployment, particularly among the young, and significant wealth inequality," says Etienne Cheret, Regional Practice Group Leader, Crisis Management France and Africa at Allianz Commercial. "Crime, corruption, and blackouts have caused widespread frustration. There is already a high level of disillusionment among the population, so we are watching the situation very closely."

Environmental activism and terrorism threat expected to rise

Between 2022 and 2023, environmental activism incidents increased by around 120%. An impactful example was the arson attack on an electricity pylon in Germany by a left-wing extremist group. This suspended production at a local Tesla plant in March 2024, leading to economic losses estimated in the hundreds of millions of euros, according to reports. In addition to high-profile protests, a trend towards using more targeted tactics, such as focusing on individuals or politicians, is evident. There is a chance that more environmental protests could escalate from acts of nuisance into larger criminal acts.

The number of deaths from terrorism increased by 22% in 2023 and is now at its highest level since 2017, although the number of incidents fell. The major terror attack in Moscow in March has put the risk of politically or religiously motivated terrorism back on the global agenda with full force. A primary driver is the radicalization of small parts of the population in certain regions, which is also fueled by the Israel-Hamas war leading to an increased risk in the US and Europe, as well as the exploitation of security vacuums in certain regions of Africa. The epicenter of terrorism has moved from the Middle East and North Africa to Sub-Saharan Africa – the most affected region globally – and is largely concentrated on the Sahel region. Burkina Faso is the country most impacted by terrorism, with deaths increasing by 68% to almost 2,000 people – a quarter of all terrorist deaths globally.

"In Africa, peacekeeping forces have been withdrawing from the Democratic Republic of Congo and Somalia as well as from countries in the unstable Sahel region. This risks creating security vacuums, which could then be exploited by armed groups and militants," adds Cheret.

Multinational companies show increasing demand for political violence insurance

Political violence activity can impact businesses in many ways. Those in the immediate vicinity of unrest can suffer material damage to property or assets and business interruption losses, while indirect damage can be inflicted on companies in the form of loss of attraction or denial of access to their premises.

"Businesses need to protect their people and property with forward planning, such as ensuring safe and robust business continuity planning is in place in event of an incident, increasing security, and reducing and relocating inventory if likely to be impacted by an event," explains Todorovic. "Using scenario planning and tracking risks in areas key to their operations can raise businesses' awareness of where political violence and civil unrest risks may be intensifying. Companies should also review whether their insurance policy covers the impact of risks such as strikes, riots, and civil commotion."

The report notes that the recent history of losses from protests and civil unrest in countries such as Chile, South Africa, France, and the US means that interest for political violence insurance coverage continues to increase. The greatest demand is from businesses with multi-country exposures rather than companies with smaller and simpler production and supply chains, although these can also be adversely impacted by such events. 

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