With acts of terrorism defined in different ways under standalone terrorism insurance policies, insureds could find themselves without coverage in situations more akin to political violence than terror, an insurance expert says.

Offering his opinion on the Willis Wire blog earlier this week, Andrew Van den Born, executive director of Willis’ Financial Solutions division, specializing in credit and political risk programs, analyzed the unrest in Turkey to advance his view.

“Turkey is in the midst of the biggest anti-government street protests since Islamist-leaning Justice and Development Party (AKP) took power more than a decade ago,” Van den Born wrote, referring to protests that began on May 31 over plans to demolish a park in central Istanbul.

While the Willis executive notes that measures have been taken to defuse the situation and while the protests are unlikely to have an immediate impact on Prime Minister Recep Tayyip Erdogan’s government, he suggests that further turmoil could jeopardize Turkey’s investment grade status and ultimately its ability to fund itself.

“Continuing political unrest could affect investor confidence in a country that is dependent upon foreign portfolio inflows to finance its large current account deficit,” he said, predicting a potential uptick in requests for political risk coverage.

Citing a Financial Times article (“Unrest Spreads in Istanbul”, published on Monday, June 17), Van den Born notes Turkey’s EU minister, Egemen Bagis, said on Saturday that anyone entering Taksim square could be considered a terrorist.

“As with the riots in Thailand in 2010 and the events of the Arab Spring, the political unrest in Turkey has brought into focus once again the possible deficiencies in buying standalone terrorism coverage,” Van den Born asserts.

He notes that a common terrorism definition in policies in the U.K. is:

“An act, including the use of force or violence, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organization(s), committed for political, religious or ideological purposes including the intention to influence any government and/or put the public in fear for such purposes.”

Even if the Erdogan government labels the protestors as terrorists, “the requirement that a terrorist act must influence or overthrow the government could possibly result in a gap in coverage,” according to Van den Born.

Terrorism is defined in different countries in different ways, he reports.

Therefore, investors should consider the purchase of broader political violence Insurance, he recommends.

Source: Willis Group Holdings