In a submission to the UK Defence Committee in April, David Gamble looked at how the private and public sectors could contribute in the face of an extreme national threat

There are three key issues that could affect the UK's resilience to an extreme threat, such as that posed by terrorist organisations planning large-scale attacks to disrupt the country's civil and economic infrastructure.

  • The British government has less control over the national infrastructure than it did 20 years ago. This is the result of privatisation. In the past, the national rail network, the national grid, the gas, water and electricity companies, BP, BT and BA, were organisations over which the Government had a degree of control. This allowed it to coordinate preparation for a major incident and to react in a coordinated fashion. This coordination and control was a form of built in resilience.

    Today, the proliferation of companies in each previously monopolised and publicly owned sector of national life makes coordination by Government more difficult, although there is some advantage in having a more dispersed management of the sectors in event of an incident. The incremental relinquishing of control over the years has resulted in significant gaps in the network of communications and understanding required for resilience.

  • 'The strength of a country is not in the height of its castles but in the mind and hearts of its people'. This Japanese proverb emphasises the need to help citizens become more resilient. Through their resilience, communities will be more resilient. The benefits from having a populace educated in first aid extend far beyond situations of extreme threat.
  • The Cabinet is the key risk management group for the country. If terrorist threats are to last for years, and the insurance industry is incapable of providing adequate cover in the face of huge uncapped losses, then joined up thinking requires the Government to accept that it has a duty to stand as insurer of last resort, as well as assuming the physical risk management of terrorist threats. Industry is willing to pay for cover, but needs as much certainty and clarity as possible in order to invest. Lack of certainty as to who will meet claims in the aftermath of an attack impairs resilience. Government should also invest in security, to combat threats which are not in industry's power to deal with.

    When looking at what the public sector could learn from the private sector about resilience, the general view is that the emergency services and the military are already highly skilled in their response to extreme threats. The anticipation and possible prevention of those threats are, however, areas where private sector tools could assist. These tools might include:

  • probability models used by the insurance industry to identify those areas and times of greatest likelihood for threats to occur
  • dependency risk models, which can map the full range of dependencies for the security of those areas and times identified above. These exist within private industry.
  • the provision of discretionary budgets and powers to public servants, so that in times of need, decisions could be made as fast as they would be in the private sector.
  • communication to the populace in areas of greatest threat in a timely and positive way, giving individuals an opportunity to be players, not just spectators. Public sector organisations should benchmark their communications response to the best of the private sector.
  • standardisation of equipment across the emergency services in the face of threats such as bio-terrorism.
  • willingness to learn from best practice in other countries and to have contingency plans to use foreign expertise where appropriate.
  • public sector buildings, especially hospitals, need to follow best private and military practice in having built in resilience in their systems and structures. Just meeting the minimum for building regulations is not sufficient.

    There are a number of further ways that the private sector could assist the public sector in the face of a threat.

    Private sector companies in selected industries should form a support network This should be done with the local emergency services, or with national services, after consultation between the parties.

    Private companies should rehearse contingency plans on a regular basis
    This should be done in conjunction with the local emergency services. Larger companies should take responsibility for their supplier networks, thus extending and deepening the area of resilience.

    Private companies should accept secondments from the public sector
    Where best practice has been identified, in say communications or IT resilience, public sector staff should be seconded to learn and to improve the networking between the sectors.

    Private companies should make a register of their equipment/assets/specialised personnel
    This could be useful in an emergency, especially an unusual emergency. The list should be made available to the local area emergency services. Government should create a central register.

    Private companies should develop disaster recovery plans for bio and nuclear terrorism These should be drawn up with experts and should be rehearsed with the public sector.

    Private companies could take the lead in offering first aid training as an employee benefit This would offer employees a skill which would give them a role to perform in the event of an extreme emergency. This would help if the catastrophe overwhelmed the existing emergency services. It would also assist community building by showing people how they could help others. It might even have the result of lowering the pressure on accident and emergency facilities for minor problems.

    Government action
    The Government could also assist the private sector. The provision of special communications for key private sector personnel is already happening as a result of Financial Services Authority (FSA) initiatives, whereby the FSA is allocating key companies special lines to maintain communications with the FSA in event of disaster. This approach needs to be widened to other key sectors where it has not already been done.

    Full information is important. Companies and individuals are more resilient if they are given timely information about terrorist threats and if the consequences are publicly debated. There are obviously security issues, but an alert population is much more likely to be well rehearsed and to be able to react effectively in a crisis.

    Canada has the so-called 'Good Samaritan Act' which protects those who go to the help of someone who has had an accident from negligence claims by the victim of their family. The UK parliament should consider something similar to support a first aid initiative and to dispel the urban myth that if people give assistance at an accident they lay themselves open to prosecution.

    The Treasury is clearly reluctant to be further involved in acting as the insurer of last resort. However, the commercial insurance market sees that accumulated losses from terrorist attacks could be so large that destruction would be inevitable, and so are unwilling to accept such an exposure. Without insurance, many aspects of investment cannot proceed. Rather than trying to finesse every situation where insurers withdraw terrorist cover, the Treasury should take a positive position and accept that it will stand as insurer of last resort for all terrorist cover. Payment for such cover would be made by the insureds to Pool Re or to Troika, or any other vehicle that Treasury chose.

    Since Pool Re was established in 1993 to insure property loss or damage, it has built up its reserves from premiums received, despite paying out for several substantial losses. It now has reserves in excess of £1bn. The Treasury has received a payment from Pool Re of over £200m for acting as insurer of last resort. Only if its reserves were wiped out by a terrorist attack would the Treasury be required to pay.

    Definitions matter in insurance because they help determine whether an event is covered or not. Uncertainty can generate huge legal costs and delays as the courts decide the meanings of definitions. The definition of acts of terrorism in the Reinsurance (Acts of Terrorism) Act 1993 that set up Pool Re is as follows:

    'Acts of persons acting on behalf of, or in connection with, any organisation which carries out activities directed towards the overthrowing or influencing, by force or violence, of Her Majesty's government in the United Kingdom or any other government de jure or de facto.'

    Since September 11, insurers have not accepted such a narrow definition. Their insurance cover for property deliberately excludes terrorist acts, and extends the definition of terrorism to include acts by a single individual, acts which put the public in fear, acts committed for religious or ideological reasons etc. These differences in cover remove certainty for the insured, as there are gaps in cover - gaps which mean that claims might not be met by either Pool Re or by the insurers.

    To further illustrate the way that definitions change over time, the Terrorism Act 2000 defines terrorism to mean, amongst other things, that:

    'The use or threat is designed to influence government or to intimidate the public or a section of the public and the use or threat is made for the purpose of advancing a political, religious or ideological cause.'

    Actions which can be described as falling within the 2000 Act include:

    'Serious violence against the person, serious damage to property, creates a serious risk to the health or safety of the public, is designed seriously to interfere with or seriously to disrupt an electronic system'.

    Pool Re covers only property damage at present, but it is not surprising to find insurers taking their lead from the 2000 Act's definitions.

    To change the definition needs parliamentary time. There has been a marked reluctance by the Treasury to consider this option. In addition, the cover for public liability for terrorism, the excess cover for employers' liability and for motor in connection with terrorism are all gradually being withdrawn from the market as reinsurance contracts fall due. This means that railways could be in breach of their licence and that many companies would be bearing huge risks on their balance sheets, risks which if they occurred, would destroy the companies concerned. PFI contracts placed by public sector organisations may be at risk. Once more, the extension of the Pool Re remit to include other covers would require parliamentary time. It would be far better to be ahead of the situation than to try to pick up the pieces.

    The Home Secretary has warned that if there is an attack on Iraq there may be riots in some British cities. The events in Oldham last year were classed by the Greater Manchester Police Authority as riots, and, under the Riots Damages Act, the Manchester Police are the insurer of last resort. In Bradford, the police described similar events not as riots but as disturbances. This allows them to avoid any claims for damage. So we have a situation where the definition of an event by the police will determine who pays the claims. With insurers withdrawing from terrorism cover it is quite possible that where such events occur in future, neither the police nor the insurers will be liable to settle the claims. The responsibility for riot damage should be transferred from the police to the Treasury.

    The Government is urged to consider creating an EU mutual so that in the event of an attack on any one country, the whole EU will bear the cost. Better inter-governmental co-operation will give rise to greater resilience.

    David Gamble is executive director, AIRMIC, Tel: 020 7480 7610. In preparing this submission, he sought opinions from a wide range of different organisations.

    An Iintelligence Network For Europe?
    A Guardian Unlimited special report in March looked at proposals to pool anti-terrorism intelligence in Europe under the control of Europe's foreign affairs chief, Javier Solana. Activities would include bringing in staff from agencies such as Britain's MI6 to operate a clearing house for information on threats from foreign terrorists.

    The report said that member states, particularly large ones, have started to overcome their reluctance to share secrets with their EU partners, especially non-Nato ones, though they still keep the most highly classified material to themselves. The proposed new intelligence network would only be used against external threats, and not against groups such as the Basque separatist group ETA.

    The EU justice and interior ministers have nearly doubled the budget of the Europol law enforcement agency in the Hague to fund anti-terrorist efforts and to increase liaison with the US.

    Britain's anti-terrorism laws, under which some suspects can be detained indefinitely without trial, have come under criticism as contravening human rights. Article 5 (1) of the European convention on human rights guarantees the right to liberty.