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. But after being elected to his third term two years ago with 50% of the vote, besides denting his image abroad and exposing the increasing polarisation of Turkish society, the last two weeks of protest is unlikely to have any immediate impact upon Erdogan’s government.
Repercussions of the Unrest
Whilst the recent concessions to suspend plans to redevelop Gezi Park as well as an investigation into police brutality may serve to defuse the crisis, any further political turmoil could put in jeopardy 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. We have yet to witness a sudden up-tick in enquiries for political risk coverage but insurers are very much adopting a ‘wait and see’ attitude as the situation continues to unfold.
Potential Gaps in Coverage
On Saturday night, Turkey’s EU minister, Egemen Bagis, said that anyone entering Taksim Square could now 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 stand-alone terrorism coverage. As a recent report by Airmic and Willis highlights, terrorism is defined in different ways across different countries . In the UK a common definition is as follows (although wordings vary):
“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 organisation(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.”
Whilst the Erdogan government has labelled the protestors “terrorists”, the requirement that a terrorist act must influence or overthrow the government could possibly result in a gap in coverage although much depends on the specific wording of the relevant policy. As a result investors are recommended to consider the purchase of Political Violence Insurance which is much broader in its offering than many stand-alone terrorism products.