From Mariupol to Gaza – measuring political violence losses with Charles Taylor Adjusting

The loss adjustment world can be seen as either highly technical or rather exciting, depending on your interest in technology, the underlying risks, and the art of measuring the cost of physical damage and business interruption.

For political violence (PV) business, the risk environment can be particularly dynamic and dangerous, sometimes involving travelling to or getting detailed information from warzones – of which there are many in 2024.

“This is loss adjusting, but it’s certainly a niche – this is not run of the mill stuff,” says Hugh Sparks, managing director, natural resources, Charles Taylor. With decades of experience in reinsurance loss adjusting, PV has become a major focus for him.

“The PV scene at the moment is very active with conflicts all over the world, and the London market is very active in underwriting these stressed areas, which means we’ve probably got an interest anywhere where there is political instability, terrorism or civil war,” says Sparks.

The same malevolent actors seem to crop up again and again globally, he suggests. Proxy conflicts are being fought in some West and Central African countries, for instance, where France and the US have lost some regional influence, and Ukrainian special forces are “fighting out a vendetta” against Russian state-backed mercenary group Wagner.

In insurance terms, this is a market that has expanded significantly in recent years, with major punctuation marks including the mass protests that took hold in countries such as Chile and South Africa five years ago, although the biggest geopolitical shift has almost certainly been Russia’s February 2022 invasion of Ukraine. Charles Taylor’s PV loss adjusting business has grown since then.

“Before Russia’s 2022 invasion of Ukraine, volume was perhaps 50% of what we do now. It’s an area that’s growing exponentially for us. I don’t think that’s only reflective of more business being underwritten; they’ve also alighted on Charles Taylor as a place that produces the type of product and creativity they’re looking for.”

Where Sparks’s job takes him depends on the insurance clients, but the scope of PV in the London market is global. Ukraine claims have been a big focus. Even somewhere like Haiti – a dangerous place verging on a failed state – and the underlying insureds are not just the likes of aid agencies that may spring to mind.

“These are commercial entities from a range of industries, from telecoms to mining, that have the foresight to purchase PV insurance – many multinationals, but also some local market firms,” he says. “In the case of Haiti, a reinsurer that underwrites business in Haiti approached us, seeing what we’ve already been doing in places such as Gaza and Sudan.”

He explains what a re/insurance loss adjuster’s research can involve for war and PV type risks.

“These are insured assets, and they could be heavy industry or telecoms companies, for instance. The claim would be physical damage to those assets or business interruption, because of terrorism, war or civil war,” Sparks says.

“To be able to quantify those losses, for the reinsurance market, you ideally need to go and look at physical damage and assess it, measure it and photograph it. In a war situation it can be difficult to physically attend, sometimes, we attend with some private security arrangements, such as in Ukraine, and for that we’ll do a risk assessment,” he continues.

“If they believe it’s possible to do a physical visit and inspection, we will do it, but we have to develop techniques for remote damage assessment, using things like satellite imagery, open source intelligence, which can be everything from WhatsApp messages to local newspaper reports, as well as human intelligence where we’ve got contacts on the ground,” Sparks adds.

Visiting the Kibbutz sites

Charles Taylor has been loss adjusting sites the ongoing conflict between Israel and Hamas. This has meant difficulty in maintaining touch with a local contact in Gaza, Sparks explains, due to chaotic conditions and communications problems on the ground, with Israeli air and ground attacks pounding buildings and causing thousands of casualties.

Sparks’s colleague, Shazia Rehman, associate director, Charles Taylor Adjusting, discussed attending two of the Israeli Kibbutz communities that were scenes of murder and kidnapping during the Hamas attacks of 7 October 2023, which killed at least 1,200 people and took more than 240 hostages.

“We gained access earlier this year and visited two of the largest of six that were notified as part of an insurance claim to the London market,” said Rehman.

“As you can imagine, it was a harrowing experience. Although we are there in a professional capacity as technical experts, there’s also the human side of things, which made that a unique experience,” she says.

A local eye-witness to the attacks, who had been lucky to escape with her life, accompanied her on the visit. Hamas militants had impersonated Israeli Defence Forces uniformed personnel, enticing people out of their homes before killing them. This was followed by a second wave of attackers, more random and chaotic, “with an emphasis on kidnappings and sexual violence”, she explains.

“We were able to move around each of the each of the flats at the Kibbutz, to see first-hand what the level of damage was, and get an account of what had happened on the day of the attack,” Rehman says.

OSINT from Mariupol

In Ukraine, there is a persistent danger attached to site visits conducted in person, sometimes “50-60km from the front line,” Sparks said. For such visits, Charles Taylor uses a security consultancy company, which provides a risk assessment puts together a journey management plan.

This involves entering the country from southeast Poland, a long drive to Kyiv, before another drive towards the facility in question. The most dangerous stretch of the journey, nearest the front line, involves being driven by armour-plated car, with an accompanying vehicle, body armour and first aid kits.

“If the risk assessment is achievable; if it makes sense, we’ll go for it,” Sparks adds.

However, it is working remotely that can be more difficult, he suggests, providing an example of a large claim for an industrial facility on the outskirts of Mariupol, a city famously badly damaged and under continuous Russian occupation since shortly after the 2022 invasion.

“There was a claim there for about $230m, with a sublimit of $100m, but what we need to do is develop a technique which produces credibility, both with the insured and the market players, to establish that $100m is payable, even though none of us can physically be there,” he says.

“The technique we used was a layering technique, principally using OSINT, starting with the satellite image, grafting onto that drawings of the site building construction and understanding a building’s ability to withstand ordinance. We then used an ex British Army ordnance expert, who would tell us what type of ordinance is used by the Russians,” Sparks says.

“We can see photographs of buildings which have been hit, and then with the construction drawings, with the layout or the machinery drawings, we can start to paint a picture. By filling in as many squares of the painting as possible, like ‘painting by numbers’, we were able to determine which pieces of machinery were likely to have been affected by what type of ordnance, each of which has a different fragmentation range,” he adds.

Loss adjuster skills have developed fast for PV risks, such as the prominence of open source intelligence (OSINT), a term derived from the military and intelligence community, rather than the insurance market.

“We’re not military people, but since the Ukraine war started, we’ve developed some very useful OSINT technical ability, and work with some specialist providers in this space. They’re staffed almost exclusively by former intelligence analyst for government,” Sparks says.

The OSINT layer used for this loss adjustment, Sparks admits, benefitted from a “very lucky” find.

“A Russian journalist who posts on Telegram embedded herself with frontline Russian troops, who just happened to occupy the site we were interested in.

“She posted many videos on her feed, in which she walked around the site. We grabbed those images to get a much better picture of the damage. We weren’t interested in their interviewing, but rather what we could see in the background of much of the footage – we’re still following her,” Sparks adds.