…Ghana Law, 2024 Elections and Insurance in perspective
By Gideon SARFO
Since 1992 under the Forth Republic of Ghana, eight successful general elections had been conducted. In December 2024, Ghanaians will be going to the polls for the ninth time. Even though Ghana is glorified on the world stage when it comes to peaceful democratic elections in Africa, there are always rumours of the unknown which create tensions, especially for businesses and investors.
Because of this there is an is an increasing demand for Political Violence and Terrorism (PVT) insurance coverage in the Ghanaian insurance market by multinational companies and businesses owned by foreign nationals. This is because investors want to protect their investment.
Political Violence
According to ResearchGate, one of the main problems of modern socio-political relations is the escalation of violence, which takes on a mass character and spreads even in the once safe regions of the world.
Political violence is the deliberate use of power and force to achieve political goals. As outlined by the World Health Organization (2002), political violence is characterized by both physical and psychological acts aimed at injuring or intimidating populations.
Examples include shootings or aerial bombardments, detentions, arrests and torture, and home demolitions. The WHO definition of political violence also includes deprivation, the deliberate denial of basic needs and human rights and denial of access to food, education, sanitation, and healthcare.
Violence
Violence is defined by the World Health Organization as “the intentional use of physical force or power, threatened or actual, against oneself, another person, or against a group or community that either results in or has a high likelihood of resulting in injury, death, psychological harm, mal -development or deprivation”.
This definition emphasises that a person or group must intend to use force or power against another person or group in order for an act to be classified as violent. Violence is thus distinguished from injury or harm that results from unintended actions and incidents.
This definition also draws attention not only to the use of physical force but also to the use of threatened or actual power. Such power or force may be used against oneself, against an individual or against a group or community, as in gang violence or repression of ethnic groups. Violence in here defined not only as resulting in physical injury but as being present where psychological harm, mal -development or deprivation occurs.
Terrorism
Terrorism on the other hand involves the intimidation or coercion of populations or governments through the threat or perpetration of violence. This may result in death, serious injury or the taking of hostages.
It is frightening because it is unpredictable. Modern terrorist groups use portable weapons; function in small decentralized cells; often receive funds from drug trafficking; emphasize flexibility in their operations; and are increasingly urban.
Terrorism differs from insurgency in that it is conducted by a small group. It also differs from state terror, which occurs through the abuse of legitimate power. The US Department of Justice categorise terrorism into four classes: criminal, psychic, war, and political. One of the aims of terrorism is to provoke the authorities into using illegal, unconstitutional, and repressive measures in order to lose public support.
Ghana Anti-Terrorism Act 2008, Act 762
States across the world have difference definitions for Political Violence and Terrorism. I want to bring to your attention how Ghana Law (Anti-Terrorism Act 2008, Act 762) defines political violence and terrorism.
According to Section 2, a terrorist act is:
(1) An act or threat of action in or outside the Republic which constitutes an offence within the scope of an international counter terrorism convention to which the Republic is a party.
(2) Any of the following acts effected or performed in furtherance of a political, ideological, religious, racial, ethnic reason or for any other reason constitutes a terrorist act.
These include an action which causes serious bodily harm to a person; serious damage to property; endangers a person’s life; creates a serious risk to the health or safety of the public; involves the use of firearms or explosives; involves the exposure of the public and the release into the environment of dangerous, hazardous, radioactive or harmful substances; toxic chemicals; or microbial or other biological agents or toxins.
Why Political Violence and Terrorism Coverage
Socio-economic inequalities are rising and political parties in Ghana do not trust the electoral system, and these are the main drivers of political violence, followed by series of the strikes, riots and civil commotion after declaration by the Electoral Commission.
Increased volatility and the uncertainties that follow political change are key geopolitical drivers of familiar and emerging risks. Companies also risk potential damage to assets through political violence, and possible broader expropriation measures or sanctions against foreign interests.
Although risks related to political instability cannot be completely eliminated, multinational organisations can take steps to limit the potential effects on their operations. To manage the potential financial impacts of these risks, businesses should check their crisis response programs to determine whether they sufficiently mitigate these effects. And they can look to commercial insurance, including property terrorism and political violence coverage.
Political Violence and Terrorism (PVT) Insurance
Political Violence and Terrorism insurance is a special risk and “named peril” policy. That means the perils stated in the policy are the policy triggers if they occur.
The insurance policy can cover the loss of or damage to property resulting from perils such as terrorism, mutiny, insurrection, rebellion, or Coup d’Etat, riot, strike and civil commotion, influenced by political events. Some insurance and reinsurance companies cover war or civil war under their Political Violence and Terrorism insurance policy, but other do not.
I will talk about that later. This insurance covers all business underwritten by an insurance company whether direct, by way of co-insurance or facultative reinsurance. The policy can cover only be physical damage to the Insured’s property or both physical damage and business interruption (PDBI).
So as a local general insurer and underwriter, how do you put Ghana Anti-Terrorism Act 2008, Act 762 into an insurance language for Political Violence and Terrorism (PVT) coverage for a local policy.
Customised Operative Clause
This operative clause is not generally accepted clause. I have personally drafted it for local underwriters, insurers and reinsurers consideration.
“For the purpose of this cover and resulting in physical loss or damage to the insured property, a political violence and terrorist act mean any acts or series of acts, including the use of force or violence and/or the threat thereof, of any purpose or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s) or government(s) or unlawful associations recognised under unlawful activities as described under international counter terrorism conventions for which Ghana is a party or as described under Anti-Terrorism Act 2008, Act 762 by the state formulated to combat unlawful and terrorist activities within Ghana for time being in force, committed for political, religious or ideological purposes, including the intention to influence any government and/or to put the public or any section of the public in fear for such purposes, subject to Section 3 of Act 762 and the conditions and exclusions stated under this policy.”
So in effect, Political Violence and Terrorism offers protection to physical assets or business from political violence that can cause damage and bring financial losses, severely impacting business or operational activity.
War Insurance
Political Violence and Terrorism insurance covers physical loss or damage to tangible property resulting from political violence and terrorism. War insurance covers physical loss or damage to tangible property resulting from war (civil or external).
As I stated earlier, some insurance and reinsurance companies cover war or civil war under their Political Violence and Terrorism insurance policy, but others do not. The definition of terrorism under Ghana Anti-Terrorism Act 2008, Act 762 does not mention war whether civil or external constitute political violence or terrorism. Which means war or war-like activities (civil or external) can be excluded under local Political Violence and Terrorism insurance policy.
Section 4 of the Act states that:
(1) Terrorist act in armed conflict means an act done in the course of an armed conflict which by its nature or context is intended to intimidate the population or compel the Government or an international organization to do or refrain from doing an act, or cause death or serious bodily injury to a civilian not taking an active part in the hostility.
(2) An act shall not be considered to be a terrorist act in armed conflict if the armed conflict is in accordance with rules of international law applicable to the conflict.
So how can one get cover for loss or damage to property resulting from war? There are two ways to consider: One is to purchase War Insurance in addition to PVT policy. The second consideration is to extend Political Violence and Terrorism insurance to cover war or war-like activities.
At what point can one distinguish between political violence and war? For an event to be classified as war, these factors must be considered: The central government must officially declare war (civil war or external war) or an international organization like the UN must officially declare that a country is in civil war or two countries are in war.
If there is internal conflict which is politically motivated but civil war has not been officially declared, it is political violence and Political Violence and Terrorism insurance can cover.
Policy Exclusions
Usually, an insured must prove that the loss or damage is directly caused by an insured peril. Policy exclusions vary depending on the insurer and the policy issued. As stated earlier, Political Violence and Terrorism insurance is a “named perils” policy. The perils stated in the policy are the insured perils for which an insured would be indemnified in the event of loss or damage. Before I go into the standard policy exclusions, let’s first consider what activities or events that are not considered as Political Violence and Terrorism according to Ghana Anti-Terrorism Act 2008, Act 762.
According to Section 3 of the Act, the following is not considered as to be terrorist acts: a protest, demonstration or stoppage of work which disrupts an essential service shall not be considered to be a terrorist act within the meaning of this Act if the act does not result in the harm referred to in paragraphs, (a),(b),(c) or (d) of subsection (2) of section 2 as I have stated above.
In addition, any perils or events not stated in the policy as covered are excluded. Ordinarily, Political Violence and Terrorism policies and reinsurance treaties exclude losses arising from an attack via nuclear, biological, chemical and/or radioactive devices, electromagnetic weapons, among others. This is due to the incalculable risk and loss potential arising from such attacks.
Risk Management Consideration
As an underwriter, the following requirements must be paramount to conduct proper risks analysis and assessment, and to add the necessary terms, conditions and warranties aimed at minimising any potential loss or damage if they occur.
The under underwriter must review the location of critical assets and identify potential risks, terms, conditions, and limitations. The sum insured must be considered. Request and study the business continuity and crisis management plans of the insured. Request for the current balance sheet to determine the actual risk exposure or the maximum probable loss (MPL) of the insured. Conduct risk survey or assessment to determine the level of risk management and security measure in place.
References:
Ghana Anti-Terrorism-Act-2008-Act-762.
https://www.ojp.gov/ncjrs/virtual-library/abstracts/features-modern-terrorism
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2652990/#:~:text=Violence
https://www.marsh.com/en/services/property-risk-management/insights/insurance-program-terrorism-risks.html
Gideon is a Chartered Insurance and Risk Management professional with experience in Property, Liability and Special Risk insurance underwriting.
Email Address: [email protected]
Contact: 0246972495
