Terrorism Insurance and Crisis Management Services – An Explosive Future? asks Philip O’Sullivan, Security Operations Manager at Northcott Global Solutions.
It is no new phenomenon that insurers use emergency response and crisis management services within terrorism insurance policies in an attempt to mitigate the cost of any claim resulting from an attack. This is due to the potentially astronomical costs and the unpredictability of the likelihood of an attack. For example, the events in the US on September 11, 2001 cost a number of insurers and reinsurers billions of dollars and had a considerable effect on the wider insurance industry. Whilst catastrophic events on this scale are thankfully rare, considerations of the 9/11 attacks should motivate appropriate and measured discussion on how best to approach terrorism insurance.
The paradigm of terror attack has undergone significant change since these attacks in September 2001. The broad trend appears to be a decline in material cost, but an increase in graphic violence and aggression. Death counts range between one and several hundred whilst the focus appears to be on brutality and horror rather than wanton destruction. This is manifested in the increasing proclivity of perpetrators to use more horrifying low-tech methods of attack. The brutal murder of Lee Rigby in May 2013, the Charlie Hebdo shootings in January 2015, the attacks in Paris in November 2015, the Nice lorry attack in 2016 and the series of attacks in London in recent months are all illustrative of this shift in paradigm. It appears that these attacks aim to play into the hands of the increasing prevalence of smartphone and video capturing technology, which facilitates the widespread dissemination of these grizzly events to a global audience via social media platforms. The attacks mentioned above caused relatively low amounts of damage to physical property but in business interference terms, these attacks have proved significantly detrimental to operations.
Many businesses suffer in the aftermath of such attacks, not due to material or personnel loss, but as a result of denial of access due to being situated within a police cordon for a number of days, weeks or even months whilst forensic investigations are carried out. After the November 2015 Paris attacks, huge areas of the city were simply shut down by police for substantial periods of time. In addition, personnel injuries if not life threatening are often severe given the nature of weaponry used in such attacks. This can result in hospitalisation for significant periods of time, preventing businesses from trading. This is especially true in cases where personnel are highly skilled, meaning that businesses who provide extensive training or require highly capable employees such as jewellers or law firms may remain unable to fully trade for a significant duration due to lack of capacity.
The expanding standalone terrorism insurance market should understand the true risks associated with contemporary threats, and provide appropriate products accordingly. A key element of doing so is to incorporate the suitable emergency response and crisis management services within terrorism policies. Insurers should consider both current, and potential future threats when carrying out both of these tasks. It is increasingly vital that insurers should consult with their emergency response provider in order to ensure that all the appropriate capacities to address the realistic set of risks are in place. Terror attacks are increasingly dynamic events, and as such the responding service on behalf of the insurer must have the appropriate adaptation contingencies to be able to ensure minimum damage to business personnel, property and reputation in the event of any type of attack.
Moving away from ambiguity, insurers and the insured should not be in the dark about what the services under discussion consist of. These companies provide rapid emergency response to businesses and individuals both domestically and abroad. These responses can be for almost any contingency including medical emergencies, political violence, crime or terror attack. The techniques employed by these companies vary, but the principle is broadly similar. Once a client activates a panic or distress signal, an operations room gathers information on the client’s location, situation and medical condition. A team is then dispatched to the client’s location for extraction. The form that this team takes is dependent on the location of the client and the challenges that the situation presents. Multilingual medical practitioners, armed or unarmed security teams, armoured cars, fixed wing and rotary deployment and extraction assets can all be rapidly used depending on the situation in hand.
Whilst these services can help to substantially reduce claims, the provider must be carefully selected and investigated in order to ensure that they are prepared to address both contemporary and future challenges. Future challenges are likely to present themselves in the form of rotary drone mounted IEDs, further vehicular assaults and perhaps the utilisation of motorbikes to mobilise attackers in urban environments. In addition to the developing ways in which these attacks are carried out, the implications of these attacks are likely to shift.
Insurers should consider the grisly nature of the attacks, and discuss the possible implications of these. Brutal videos of attacks on the streets of Paris may discourage tourism, whilst stabbings in London Bridge may discourage employees from returning to work after attacks in this business district. Smaller businesses may suffer considerably even from the indirect fallout of terror attacks, particularly as perpetrators prioritise horror over destruction. Given potential mental impact of these attacks, insurers should consider developing psychological harm provisions into both their terrorism policies, as well as their crisis management services. The latter could include an element of emergency counselling for employees to ensure that client businesses return to full capacity as quickly as possible.
A final possible area for development of the relationship between insurers and emergency response organisations is in the claims process. Often claims are made that pertain to volatile regions where it is not possible to effectively investigate a client’s claim. Emergency response organisations are able to offer assets and technology to provide access to otherwise unavailable information to inform the claims decision. In one particular case, damage to an abandoned facility was ascertained and examined via satellite reconnaissance that informed and streamlined a multimillion-pound claims process enabling a more accurate award decision. It is in exciting areas such as this that development could occur in the relationship between crisis management and insurers to benefit terrorism insurance.
About the author: Philip O’Sullivan has an MBA and is a member of the Security Institute. Northcott Global Solutions offer emergency response, medical evacuation and related security services such as crisis management.
