November 2015

Terrorism and political violence update

The current threatThe number of insurers offering terrorism and political violence insurance has continued to increase.

The abundance of capacity and breadth of cover means it’s a buyers’ market and businesses are now able to demand bespoke cover that meets their specific needs.

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The recent appalling attacks in Paris have again shocked the west and brought fear to the streets of Paris. Not since the Madrid bombings in 2004 has Europe experienced such loss of life due to a terrorism event.

The Paris attacks targeted people going about their everyday lives, spending their Friday night at the football, a rock concert, or dining out at a restaurant. The assailants sought to bring maximum terror, targeting the innocent. For the West this night reaffirms the current threat under which we live.

We must remember however, that terrorist attacks of this nature have been happening throughout 2015. Nigeria, Beirut, Egypt, Tunisia, Pakistan, Somalia, Libya, Kenya, Saudi Arabia and many other countries have all been victims of attacks this year. By the time Paris was hit on 13th November, 2015 had seen nearly 300 terrorist events.

Whilst the loss of life has been significant, these attacks are very different to 9/11. They are smaller, often perpetrated by individuals or small groups. ISIS may claim responsibility, but in reality they are carried out by its affiliates, allies, or lone-wolves who subscribe to their terrorist ideology. For ISIS, and others, this makes attacks cheaper and easier to execute than 9/11 style destruction, but they still have devastating consequences.

Not since 9/11 have we seen such large scale destruction: the most recent terrorist actions haven’t created any meaningful physical damage. Instead of destroying property, the attacks focus on taking lives. For businesses, this is a different type of risk: emergency response plans and security arrangements need to reflect this. Insurance policies also need to cover these new scenarios.

The insurance market is prepared for these incidents, as well as the other 300 reported worldwide terrorism incidents that have happened in 2015 thus far. Not all of these incidents cause physical damage, and the market is adapting to insure these losses too.

Market updates

We can help businesses develop bespoke insurance solutions to fit their particular threat levels. We act as your strategic partner, understanding your business so we can provide you with the best advice to make the most informed decisions.

Our services

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UK terrorism

The UK’s current threat level is severe. This means a threat is highly likely, and reflects the risks posed by Al-Qaeda, ISIS and their related networks.

The level is set by the Joint Terrorism Analysis Centre and the Security Service (MI5). The current level means additional protective security measures are in place.

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Types of terrorism cover availableDifferent types of businesses will need different types of cover.

For example, a large carpet manufacturer with locations throughout the UK, who does not buy Pool Re cover or standalone terrorism insurance from the market, would not need full political violence cover.

However, any businesses where there is exposure to political violence, for example businesses with operations in the Middle East or parts of Africa and Asia would need expansive cover.

In the UK there are five levels of terrorism threat.

Low An attack is unlikely

Moderate An attack is possible, but not likely

Substantial An attack is a strong possibility

Severe An attack is highly likely

Critical An attack is expected imminently

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olitical violence cover

Pool Re

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Pool Re is the government scheme designed to ensure all businesses can access insurance for damage caused by acts of terrorism in the UK.

Pool Re offers broader cover than standalone terrorism insurance – it includes nuclear, chemical biological and radioactive cover, unlike most other policies. However, businesses are obliged to take the rates set by Pool Re.

This insurance is commonplace for those with the simplest of risk profiles, but for anything more complex, bespoke market cover is likely to be the best solution.

Pool Re has made some significant changes to its proposition. You should check your cover to see how the changes might affect you.

1. Some rates and postcode allocations have changed.

2. An SME discount for businesses who insure for less than £2m material damage has been introduced.

3. Discounts for value of deductibles and loss limits when they’re set at a high enough level may be available.

4. Businesses engaged with a National Counter-Terrorism Security Office initiative now qualify for a discount.

The global terrorism landscape has changed significantly in the last couple of years. Civil unrest and the rise of ISIS in the Middle East have redefined the threat.

ISIS are a new type of terrorist organisation; they successfully recruit hundreds of followers from both inside and outside the Middle East and are developing a network of affiliated terrorist organisations across the globe. They employ modern tactics, using technology to recruit new followers and attack their enemies.

Global terrorism

Global terrorism poolsMany countries have their own Pool Re-type schemes.

Each scheme has different terms and conditions, with varying definitions of terrorism and exclusions. Almost all of the state terrorism schemes offer cover for acts of terrorism within the territories of that country only.

Global companies, who cover a range of territories with differing threat levels, will need to supplement or replace these global pools with more bespoke cover.

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PeaceKeeper is our new line slip facility to cover both physical and non-physical damage sustained as a result of protests against unpopular projects, such as construction, extraction or demolition.

We’ve seen protestors against fracking, wind farms and other unpopular construction disrupting the day-to-day business on sites. Arguments can be heated and threats alone can be enough to bring work to a standstill. If property is damaged, property or casualty insurance will normally cover this. But if a project is delayed, businesses would normally be left out of pocket without a non-damage waiver. The financial costs can be heavy.

This policy includes security advice from MS Risk.

With their experience, you can minimise the impact of a protest. And you will have a strong liaison point with police, should things escalate.

MS Risk is retained as an advisor by specialist syndicates in the Lloyd’s of London insurance market.

This product will be ready from January 2016.

Stop protests getting out of hand

Key features

• Security and planning advice (essential before the controversial work starts)

• Non-physical damage loss trigger

• Worldwide coverage

• Cover for small sites or specific locations

• Up to £50 million limit

• No compulsory excess

• 24/7 crisis response service

To discuss the possible relevance for you, please speak to your usual Lockton contact, or our specialist team in London.

This policy would be relevant for:

• Construction

• Rig owners

• Extraction technologies

• Surveyors

• Civil engineers

• Support services to construction

• Mining

• Financing partners

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Nuclear, chemical, biological and radioactive…

Most standalone policies won’t insure against nuclear, chemical, biological and radioactive (NCBR) perils. They are too expensive and insurers are limited by the aggregate available to them.

SecureBio, a commercial enterprise, offers NCBR consultancy services. This could be useful to businesses not prepared to fork out for NCBR cover, but who are worried about the risks of NCBR.

• Pre-incident support including desktop review of plans

• Access to a 24-hour hotline

• Fully accredited team based at Porton Down - UK MOD NCBR research park

• Mobile deployment team

• Conduct detection, identification, monitoring and analysis of NCBR elements on site

• Liaison with UK authorities

• Post event risk management and decontamination

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Mapledown Underwriting LLP

The Lockton terrorism team benefits from its own in house managing general agent, Mapledown Underwriting LLP.

This year, Mapledown extended its underwriting services to providing insurance cover for political violence as well as terrorism insurance. They can provide capacity for up to $300,000,000 per risk for property cover and $10,000,000 per risk for terrorism liability. They can provide terrorism cover in most areas of the world.

Mapledown provides underwriting capacity exclusively to Lockton clients and can be accessed through the Lockton Wholesale Terrorism broking team.

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Lockton Companies LLP.Authorised and regulated by the Financial Conduct Authority. A Lloyd’s broker.Registered in England & Wales at The St Botolph Building, 138 Houndsditch,

London, EC3A 7AG. Company No. OC353198.

www.lockton.com

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