How to Respond To New Types of Terrorism Threats
The recent terrorist attacks in Belgium, Paris, and elsewhere illustrate the devastating effects such events can have. In addition to a growing threat of attacks worldwide, recent events have illustrated several emerging risks that are changing the impact these type of events have on businesses, and which many may not be mitigated against.
For example, consider non-physical damage losses: In these cases, individuals are increasingly becoming the primary target as opposed to property. In Brussels and Paris, for example, the attacks resulted in the tragic loss of human life, but relatively minor property damage losses.
Other types of non-physical damage losses to consider include:
- Loss of attraction: For example, if an airport experiences a terrorist attack, a nearby hotel may see a drastic fall in guests and a resulting loss of revenue following the event.
- Malicious threat: Business interruption from a terrorist threat, even one that’s not carried out, can be costly. If an area needs to be evacuated or sealed off by authorities, it could result in the suspension of operations for you or one of your key suppliers.
- “Lone shooter” events: The US, in particular, has seen an increase in the number of events carried out by active shooters. The average number of attacks per year more than doubled for the period between 2007 and 2013, compared with 2000 to 2006. These events typically result in high loss of life, but limited property damage.
- Nuclear, chemical, biological, or radiological (NCBR) attacks: Such as the 2001 Washington Anthrax attacks. There have also been reports that ISIS is working on biological weapons. These events can cause significant business interruption, threaten employee safety and have high decontamination costs.
The insurance market has responded to emerging threats by creating new types of coverage to fill in existing gaps in the market, with new coverages indemnifying losses from active shooters, non-physical damage, cyber terrorism, and NCBR. These policies can indemnify you for resulting business interruption, loss of revenue, and, depending on the insurer, provide crisis management services.
In many cases, these risks are excluded from traditional terrorism-only policies, which typically cover physical damage only; therefore you may benefit from looking at recently developed, more specialist coverage, depending on your exposure to these types of events.
In view of the recent increase in attacks, which some experts call the “new normal”, businesses should:
- Carefully consider the change in risks and the options available for mitigating them.
- Develop/review business continuity and emergency response plans to ensure they are prepared against this rising threat.
- Work with your broker to tailor your terrorism insurance to address gaps in cover and emerging risks.