April 10, 2017 by Gloria Cilliers, Editor
Terrorist attacks increased 14 percent worldwide (up to 4,151 from 3,633 in 2015) and 174 percent (up to 96 from 35 in 2015) in Western countries in 2016, creating an increasingly volatile operating environment for international business, according to a new report from Aon.
Aon’s 2017 Risk Maps for Political Risk, Terrorism and Political Violence, released last week, revealed that the most frequent targets of these attacks were private citizens and property (1,342 attacks), followed by the military (799 attacks), and public gatherings (714 attacks).
Oil and gas companies were the target of 41 percent of terrorist attacks on commercial interests in 2016 and the trend has continued in 2017, the report states.
Other sectors hardest hit include retail (11.86%), construction (7.51%), financial (7.51%) and media (7.51%).
Last year, the United States sustained the highest number of terrorist attacks in a decade, however the report suggests this threat will likely remain moderate this year.
James Gregory, Aon Canada’s regional director for crisis management, told Canadian Insurance Top Broker that, while there’s been a significant increase in the number of attacks in North America and Western Europe, “it’s worth bearing in mind these attacks still account for less than three percent of the total global terrorist attacks”.
“That being said, Canadian firms are involved in operations in hostile and complex parts of the world, both from a terrorism and kidnap and political risk situation. We’re having increased conversations with clients who are expanding into those areas, in terms of their options to protect themselves against exposure, as well as how they need to manage their travel better. These days, businesses need to understand they need to know where their people are, have contact methods and support in place in an event of an attack.”
New risk, new cover
Gregory said the shifting dynamics around terrorism attacks requires a different insurance approach.
“If you look at the type of attacks seen in the mid-1990s, by the IRA and for example 9/11, they were high profile and sophisticated in nature, organized and executed by large terrorist organizations. These days, terrorist attacks are much less sophisticated and organized, but can be just as disruptive and terrifying in that they’re unpredictable and typically aim to cause the maximum number of casualties,” Gregory said. “For example, half of the casualties in recent attacks in the United Kingdom, France, Germany and Sweden were caused by attacks from vehicles, which are easier to come by than say, assembling an explosive device. Due to accessibility and ease of how these attacks can happen, sadly, they will continue.”
This makes things complicated from an insurance perspective, he added. “Whereas we used to address terrorism risk by insuring assets against an attack, now we’re considering high impact physical damage and security.”
The industry needs to “look beyond just property damage and consider other insurance aspects”, Gregory said. “It’s a much broader conversation than we were having 10 years ago, when we were merely buying enough insurance to ensure physical assets are protected. We need to consider broader protection, whether having an active shooter evacuation plan, people safety issues, and preventative measures, like running active shooter risk scenarios.”
Preparedness and response planning is key, he added.
Gregory said that the insurance industry is trying to come up with innovative and evolutionary solutions.
“We recently placed a policy for a client that covered expenses, loss of attraction and threats that might occur post-event. That was a new type of insurance that didn’t exist two to three years ago. We’re seeing clients looking for Nuclear Chemical Biological Radiological insurance for hospitals, for example, that would typically be excluded from a regular terrorist policy. More clients are buying standalone terrorism liability policies, in the event they’re found liable for causing anyone’s physical injury or putting them in harm’s way,” he said. “But there’s certainly more to be done.”
This story was originally published by Canadian Insurance Top Broker.