Canadian Underwriter

Business losses from terrorism shifting away from property damage: Aon

April 6, 2017   by Canadian Underwriter

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Terrorism “linked to” Al Qaeda and the Islamic State of Iraq and the Levant “remains a critical threat” worldwide, especially in the oil and gas sector, but with a recent trend towards terrorists using vehicles as weapons, the loss to the businesses in the west tend to be business interruption and loss of life rather than property damage, Aon plc suggested Thursday.

“What the last few years has taught us is it’s not all about physical damage these days,” James Gregory, Aon Canada’s regional director for crisis management, said of terrorist attacks.

He made his comments in an interview Thursday after Aon released its Terrorism and Political Violence Map and its Political Risk Map. Both maps were combined this year in one report.

“If you think back to the days of the (Irish Republican Army), they would target property damage, they would typically give some sort of warning in advance to say, ‘We have planted a bomb in a certain place’ so there was allowed to be an evacuation,” Gregory said. “So the target wasn’t necessarily people. It was mainly properties and buildings. These days, conducting attacks against buildings and property is much more difficult.”

Aon reported Thursday that in 2016, there were 96 terrorist attacks “the west,” which Gregory said includes North America and Western Europe. In 2015, Aon counted 35 attacks in the west.

“These days, perhaps, countries that in the past clients would have thought of as safe, five years ago — you would have sent people there without a thought,” Gregory said, citing France, Belgium and Britain as examples. “But I think people are now making sure that if they are sending people to those places, that they have plans in place and procedures in place so they can respond adequately in the unlikely event that there is some kind of event that affects the travelling population.”

In 2016, Aon reported there were 1,752 terrorist attacks in the Middle East, 658 in South Asia, 543 in sub-Sarahan Africa, 337 in North Africa, 292 in Eurasia, 246 in Asia Pacific and 122 in Latin America and the Caribbean.

“Aon works with several partners in the development of our maps and it would be a combination of all of these partners that we work with to collate that data,” Gregory said.

“Many Canadian companies are traveling further afield to do business and as a consequence of that, they are growing more aware of their responsibilities to their people that they are sending abroad and to their shareholders, to make sure that as they do that sort of travel, beyond where they might have in the past, they are taking the necessary precautions to make sure, from a travel perspective and from a political risk perspective, that they are protected,” Gregory said.

In the west, terrorists have recently been using vehicles, firearms and edged weapons, Aon suggested in the report.

In the west in 2016, 189 people died from terrorist attacks. Of those, 99 died in vehicular attacks, which “became the single most lethal form of attack in 2016 in Western countries for the first time ever,” Aon reported.

“The targets of such attacks have tended to be unsecured crowded locations that can yield mass casualties and high levels of disruption, such as busy streets, markets, airports transit hubs and entertainment venues,” Aon reported. “The impact of the threat in terms of business losses continues to shift away from property damage to business interruption and loss of life.”

Terrorism “linked to” Al-Qaeda and the Islamic State “remains a critical threat, threatening dozens of countries and key sectors, including oil and gas, aviation, tourism, retail and media,” wrote Henry Wilkinson, head of intelligence and analysis and risk advisory for Risk Advisory Group.

“What we have found over the last few years, and what we hope this map demonstrates, is that the way clients look at terrorism needs to be in a broader, more holistic approach instead of just buying a physical damage policy,” Gregory said. “We are working with insurers to make sure that the product keeps up with the evolution in the types of events that we are seeing around the world.”

The definition of terrorism varies “from insurer to insurer, but most of the events that have occurred around the world there is potential from some recovery under a terrorism policy,” Gregory said.

Aon’s Terrorism and Political Violence Map has a global focus and comments on the risk from: terrorism and sabotage; strikes, riots, civil commotion and malicious damage; and insurrection, revolution, rebellion, mutiny, coup d’état, civil war and war. Aon produced the report in conjunction with The Risk Advisory Group.

The Political Risk Map covers emerging economies and not nations that are part of the Organisation for Economic Co-operation and Development (OECD). Produced in conjunction with Roubini Global Economics, the Political Risk map comments on economic and fiscal risks, including exchange transfer, sovereign non-payment, political interference, supply chain disruption, legal and regulatory and political violence.

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