From organised poisoning to lone shooter events, the terrorism landscape is evolving. Joanna Hitchcock, terrorism underwriter at Liberty Specialty Markets, tells us how best to prepare
High profile terrorist attacks and false alarm events are changing the terrorism landscape. The Salisbury poisoning, and active shooter events involving guns rather than bombs, such as Paris attacks, is an indication of the shift in terrorism perils. In your view how has the terrorism landscape changed?
Over the last 24 months, attacks on the West have occurred with greater frequency and randomness, with the number of casualties in North America and Western Europe giving particular causing for concern. Equally worrying is the fact that terrorists’ tactics have changed. Led by foreign fighters or lone, home-grown recruits, these assaults like attack on London Bridge and Borough Market are localised and designed to inflict mass casualties by focusing on softer targets and public venues –from beach-side promenades, concert halls, bars and restaurants to airports, airliners, trains, train stations, sports stadiums, city pavements and even local government health centers. The ability of terrorists to use fear to disrupt business, causing economic but not property damage, is a fast-growing phenomenon that starkly highlights a critical issue for the insurance industry – how to help clients who have been left without the right protection in a world where the threat is becoming more frequent and the consequences more severe?
How can risk managers minimise the impact that a terror attack could have on their businesses?
Unquestionably, the frequency and scale of terrorism and its associated costs have been rising. With random and localised attacks causing increased casualties and disruption, smart businesses are looking for ways to mitigate risk and ensure they don’t find themselves with a protection gap. With large sections of commercial districts frequently cordoned off by the authorities while investigations take place, companies concerned by the prospect of this post-attack paralysis are keen to stay one step ahead of the curve. The result is they are turning to terrorism insurance products that offer non-physical damage business insurance well as standalone coverage that responds immediately to protect their assets both at home and abroad.
Other than the risk of active shooter events, what other terror risks should risk managers focus on?
It’s not the nature of the threat that businesses should focus on –but the likely consequences of terrorist acts in any form. The severity of the situation is illustrated again by events in London in 2017. After the attack at London Bridge on June 3rd 2017, Borough Market was closed for ten days, causing significant losses for many local traders, estimated at nearly £1.5 million from a reduced flow of visitors. These losses came from lost sales, staff expenses and wasted stock while the market was closed. Many of the businesses found these economic losses were not covered by their insurance policies so could not be recovered. In August, Merlin Entertainments, owner of the London Eye and Madam Tussauds, reported that its attractions had suffered a drop in foreign visitors because of terror attacks. The inability of businesses to mitigate many of these losses has created considerable customer dissatisfaction.
How has this had an effect on the demand for terrorism insurance and what insurance trends do you see here?
Demand for cover is rising. The result is that the market is extending political violence coverage to include a range of new risks, offering more expansive cover. These include: loss of attraction, denial of access, third party liability, employee liability and cyber. Loss of attraction is particularly attractive to retailers, hoteliers and entertainment companies. As firearms have become more common, so we have also included active-shooter language traditionally seen in crime policies into products covering terrorist events. This offers cover if an attack takes place on a client’s property.
This coverage is available to help defray the cost of lost business and recovery. Policies can also provide customised wording and, in some cases, global reach that extends protection beyond a firm’s home assets to its operations abroad.