How to make your terrorism response fit for purpose

The nature of terrorism is evolving, with the emphasis now on causing more loss of life and economic damage rather than traditional property damage. This is raising questions about the adequacy of the protection provided by the traditional sabotage and terrorism polices.

Some aspects of the cover are effective, particularly in relation to property damage and business interruption, but businesses must also consider the consequence of bodily injury, liability and other indirect effects on their operations.  After the Paris attacks, the lockdown in Brussels cost an estimated £350 million in lost revenue.

Terrorism policies are now being enhanced to respond to these risks. The trigger, whether from the private market or state-backed insurance pools, has historically always been property damage. Even prior to recent events, the market was already including elements of contingent business interruption cover such as prevention of access to premises.

Market is responding

However, insurers are now more closely addressing potential gaps in the cover, with products providing a wider range of non-damage business interruption cover including loss of attraction, threat and active assailant - without related property damage.

As usual the challenge is capacity, particularly for larger businesses. The new products are not yet standard covers offered by all underwriters and at this point it would be difficult to get limits over $25-$50 million.

Whilst a holistic terrorism cover is still in development, businesses can find a solution in using these newly available products to ensure their risk from such events is adequately managed.

In the event of a terrorism attack, sadly there is likely to be human collateral involved as well as property damage and business interruption. Businesses need to cover both: the property damaged and business interruption through a terrorism policy with their people risk covered via a kidnap and ransom policy.

The latter is badly labelled in this instance - a kidnap and ransom policy will cover an array of people-related risks, including crisis response in hostage situations such as the Bataclan Theatre attack, as well as any resultant liability and personal accident claims. The eventual aim would be a wraparound solution covering assets, balance sheet and people in a single policy.

Managing the crisis

The other key imperative for businesses is to rehearse their response to a terrorist attack. Part of this is simply knowing where people are and how to get hold of them. But it's also essential to have crisis management and business continuity plans in place and well-rehearsed in order to deal with the complexity of an event.

With vast teams of people involved after an attack - from quantity surveyors and architects to security consultants and post-traumatic stress counsellors - it is vital to implement a tightly integrated programme of crisis teams across the business. All responses need to be well prepared, building-resilient operations that ensure the business is equipped for any eventuality.

It's also important for both governments and businesses to think creatively. There is a tendency to be consistently wrong-footed because we prepare for the last event, rather than the next event.

With several of the new products now available, crisis management fees are part of the offering and essential for providing expertise before, during and after a terrorist attack.

It shows that the market, as might be expected, is rapidly evolving in response to these new risks.

Raj Rana is head of war and terrorism at JLT Specialty.