FREAK Shots: How's Your Riot Insurance?


Reader Chris Markl emailed us these photos of signs from Nairobi offering insurance against political violence, terrorism, and riots. If Sudhir Venkatesh is right, we probably won’t be seeing similar insurance pitches in the U.S., though maybe London could use them.

Markl wonders why another type of insurance isn’t offered in the U.S. by now: the recovery of embezzled money.


that sounds so cool. Maybe we also need insurance against
economic downturn,job losses and recession!!!

Bob Luby

Fidelity bonds offer compensation for the fraudulent acts of dishonest employees. That includes embezzlement, doesn't it?


Can I get insurance that covers me if my insurance provider goes belly up?


How about against having your reinsurance company (AIG) fail.

Mark Wolfinger

I'm amazed by the lack of knowledge on how to insure an investment portfolio. So many people got clobbered last year, and much of it was avoidable.

Conservative option strategies (collars, for example) could have saved millions from such huge losses.


Tariq F

Speaking of insuring unconventional things, there's been talk recently about new businesses looking to offer marriage insurance.

Once a mechanism can be created to weed out the obvious risk of fraud, one is led to wonder what criteria could legitimately be used to predict a higher chance of divorce. How much does religion matter (i.e., Orthodox Jews less likely to divorce than Athiests)? How much does age matter? How much does previous dating history matter (does a Don Juan who has slept with many women seem more likely to cheat)?

I'm not an actuary but find this topic interesting (as is the topic of insuring against political violence - my family is from Kenya actually). In the case of political violence, does my insurance plan become void if I publicly criticize the incumbent dictator?

On the marriage topic, this article is interesting - a British professor has devised a way to predict chances of divorce:


chris markl

I've wondered a lot about this type of insurance. It seems that the majority of Kenyans wouldn't need it as political violence while it does happen it seems to be isolated to certain areas of nairobi. but then again there are these 1 in a 100 year floods in the US and else where. I am wondering if the fact that this type of insurance speaks to the stability or instability of the country or both. Instability obviously because it seems that there is a legitimate concern about riots destroying property but stability because this type of insurance would be either unavailable or really expensive in places where riots or political violence is common place. As I cant imagine this type of insurance being available in Darfur, Iraq, or Pakistan.


Actually, we DO have insurance in the US to cover embezzlement losses. You can write off your losses against your income tax, which gives a partial but pretty substantial recovery of the losses. And if the fraud / embezzlement occurs in a registered investment account, you have up to $500k per account of coverage from SIPC (Securities Investment Protection Company).


You can insure against anything, but whether or not you do is a function of the perceived probability matrix and, most importantly, transaction costs. If transaction costs reach a certain threshold relative to the value of the premium, most people will choose to self-insure. Any personal equity that can be leveraged is a form of self insurance. You don't have to put premiums in a purposed account to self insure.