Attention turns to terrorism liability risk and covers

Terrorist attacks in Europe have increased in recent years, with notable attacks on public places including airports, trains, shopping centres, theatres and music festivals. The way in which certain terror groups select targets and attack has been evolving rapidly during the past 24 months, especially in western Europe, according to Scott Bolton, director of crisis management at Aon Risk Solutions. Most terrorist groups have historically operated at a national level, targeting government and security services. However the approach of Islamic State has been international, focusing on people and public assets.hideIn Europe, there has been an increase in relatively low tech terror attacks by self-starters, unsupported by wider groups. In addition, fighters returning from wars in Syria and Iraq, Yemen or Libya are able to undertake more complex, group attacks such as those seen in Paris. “Fundamental to the change [during] this period is the Islamist terrorist groups’ focus on mass casualties; the attacks are against the public rather than the traditional targets for terrorism and the aim is to kill as many as possible,” said Mr Bolton. Increased demand The terrorist attacks in France and Belgium, and more recently in Germany, have led to an increase in enquires about insurance to cover terrorism liability exposures, according to Michelle Hurley, head of terrorism and political violence at Marsh’s international wholesale placement division. “Some clients have wanted to be better informed about where they stand with their terrorism liability cover and what products are available in the market,” she said. Enquiries have come from a range of sectors, although interest is highest among those with large public liability exposures, such as hospitality, transport, entertainment and retail firms. “Terrorism liability is coming under more scrutiny and more clients are reviewing their policies to find gaps in cover,” said Ms Hurley. According to Nick Mayor, chief underwriting officer at Zurich Global Corporate UK, certain at-risk sectors – such as entertainment, hospitality and security – will often have terrorism exclusions within their liability policies. However, mandatory insurances, such as employers’ liability in the UK, cannot have terrorism exclusions due to their compulsory nature, he added. But Mr Mayor stressed that, provided organisations have taken all reasonable steps to screen and train staff, put evacuation procedures in place and deal with suspicious packages, it is unlikely they will face legal liability following a terrorist attack. “Therefore, legal liability programmes cannot be viewed as the first port of call for a terrorist event, unless legal liability can be shown,” he said. According to David MacPherson, assistant vice-president for property and terrorism at Marsh’s international wholesale placement division, most conventional liability lines – such as general liability, personal accident and motor – view terrorism as an add-on. “Most general liability forms for corporates are broad and tailored to the needs of clients but they are mostly silent on terrorism, or where it is included it is often not well defined,” he said. “Clients are becoming more aware of terrorism coverage and are asking for alternatives to that embedded in traditional policies,” said Mr MacPherson. “As a result, we are seeing a move towards the standalone terrorism market for liability exposures,” he added. Developing market With only around ten players in London, the terrorism liability market is less well developed than the property terrorism and political violence market, explained Marsh’s Ms Hurley. However, insurers are looking to respond to changes in terrorism risk and listen to clients’ needs, she said. An increasing number of underwriters are able to offer terrorism liability cover, either as a standalone product, a general liability wrap or combined with property terrorism cover. “It is a work in progress, but [during] the next 12 months there will be more facilities offering terrorism liability. I expect the market to expand over time and for capacity to increase,” said Ms Hurley. It is becoming much more challenging to detect and disrupt terror attacks from “franchise” terrorists with no previous links or obvious contact with terrorist groups. “These individuals are, however, less able to undertake the more complex, higher technology attacks – such as using firearms and bombs. That said, the attack in Nice, France that killed 85 people could be replicated again by a self-starter with the appropriate motivation,” said Aon’s Mr Bolton. Complex attacks There are indicators that the more organised, supported attacks are becoming more complex, he said. For example, the use of firearms and smaller explosive devices, as well as sequential attacks extending the duration and area of an event, show a transfer of tactics from the Middle East to the west, he said. The recent attacks in Europe also show that Islamic militant terrorists are planning to cause mass casualties, according to Mr Bolton. “Trains, buses, stations and airports, as well as hotels, sports events, shopping malls and crowded shopping streets, present the large numbers of people in a set place at a set time that provide these types of terror group with the opportunity for an attack,” he said. “While it is not possible to predict the when and the where, it does not require a quantum leap of imagination to say that future targeting by Islamic terrorist groups will continue to include these types of location – transport, retail, sports and events,” said Mr Bolton. “And as they come under increasing pressure in Iraq and Syria, they are likely to increase attempts to attack the west – Europe and the US primarily – using both self-starters to deliver low technology-type attacks, as well as more organised groups for Paris-style attacks,” he said. “We may begin to see the attacks expanding in scope to target infrastructure of national importance in order to strike more significantly at the financial health of western nations. Finally, it would be expected that cyber attacks by the group or sympathisers increase in frequency [during] the next 12 to 18 months,” Mr Bolton added.

Attention turns to terrorism liability risk and covers

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