Terrorism risk not emerging but evolving

Early this week a suspected terrorist drove a van into a group of people outside the Finsbury Park Mosque in London. London and the UK have had a horrific month of terrorist-related violence after the London Bridge and Manchester Arena tragedies.

And closer to home we’ve seen the terror siege in Brighton, a suburb of Melbourne, where four men have now been charged in connection with the fatal attack that left a man dead and three police officers seriously injured.

Terrorism’s impacts on business and insurance

While we may not immediately consider the impact of these types of terrorist attacks on business, the question is becoming increasingly relevant and prominent. And it has a flow-on effect – if Australian businesses and people are impacted by terrorist attacks, what does this mean for the insurance industry and brokers?

1. Corporate travel implications

It’s more important than ever for employers and their insurance brokers to understand terrorism risk when placing coverage for their corporate travellers. There is an evolving duty of care to employees with respect to their safety and security.

When corporate travel policies encompass terrorism risk, it could make a substantial difference to clients when it comes to evacuation, medical treatment, covering the cost of finding missing clients who’ve lost contact during an attack or providing invaluable advice on personal safety.

Dynamiq, a global risk management company, notes the increased frequency of attacks that has come with the rise of ISIS.

“But ISIS has also given rise to another form of attack – the lone wolf assault,” said Dynamiq CEO Daniel Pritchard.

“This attack is characterised by the use of unsophisticated weapons (such as a car or an improvised explosive device). The introduction of such attacks, marked with allegiance to various terror groups, has made the jobs of law enforcement, security and risk managers much harder.

“In many situations, these attacks may not be foreseeable or preventable, so a well prepared and exercised emergency response plan is vital.”

2. Being reactive is risky

Pritchard said brokers’ proactivity will be a key differentiator moving forward.

“In the current global threat environment, every organisation should have terrorism included in their corporate travel policy and that includes for travellers inside Australia.

“Brokers should begin conversations with clients around safety of their people when it comes to travel, and look at what the client’s current travel policies and practices are and how they can be improved.

“Pre-travel training on what to do in the unlikely event that your people get caught up in a terrorist incident while they’re working overseas is one way clients can improve their risk management practices,” he said.

Understanding and staying up to date about specific destinations is also crucial, as is good communication between the travelling employee, the employer and the assistance company.

3. Keeping up with legislative changes

It’s also important to stay across changes in legislation, such as the changes to the Terrorism Insurance Scheme that NIBA reported on earlier this month.

The changes extend the Scheme’s coverage and will ensure it remains fit for purpose. Back in April this year, ARPC Chief Underwriting Officer, Michael Pennell PSM, said the clarifications will benefit insurers and policyholders by filling the mixed use/high value building gap and removing uncertainty in the event of a Declared Terrorist Incident involving biological or chemical material.

“These changes will modernise Scheme coverage, underpin its financial strength, and ensure ARPC is better equipped to protect Australia from the economic losses caused by terrorism catastrophe.”

The ARPC is a public financial corporation that administers the government’s terrorism reinsurance scheme. In the event of a Declared Terrorism Incident by the Treasurer, the Terrorism Insurance Act will be activated and override any terrorism exclusion clauses in insurance policies.

4. Fundamentals of terrorism insurance

Stella Pruscino from Willis Tower Watson spoke about terrorism risk at the 2016 NIBA Convention, noting “in the last ten years, the nature of terrorism threats has changed greatly, with terrorism now causing more loss of life and economic damage than traditional property damage”.

Employers must have a robust risk management plan addressing the terrorist threat and take active steps to respond to the rising threat of active shooter attacks, while providing employees with clear guidance regarding what to do in the event of a terrorist incident.

“Without preparation there remains the potential for liability claims in the event the worst should happen.

“A significant incident affecting a local community is likely to have a multitude of consequences including the requirement for businesses to enact trauma response plans, review security measures, test evacuations and lockdown procedures,” added Pruscino.