- By Chris Kremidas Courtney
Julian Enoizi is Chief Executive at Pool Re, a provider of terrorism reinsurance cover in the United Kingdom
Terrorists successfully attacked the United Kingdom five times in 2017. London and Manchester were added to the growing list of cities across the globe forced to endure the violence associated with extremist ideology. Distressing scenes of death, destruction and injury have for some time now been soberingly commonplace on our televisions, streets and in our national psyches.
Security and surveillance forces across Europe continue to successfully thwart the majority of attempted attacks. However, their strained resources are unable to prevent in every instance the increasingly random and indiscriminate actions of individuals determined to commit atrocities.
National threat levels remain steadily severe, and we should not mistake the military gains against Daesh in Iraq and Syria as a sign of diminished risk to our communities. The threat has only evolved, and deterrence, disruption and detention of terrorists form only one part of the long-term solution.
Other, just as critical, elements of resilience, mitigation and research can and should be played by the private insurance sector, in collaboration with public sector policies and resources.
Security and surveillance forces across Europe continue to successfully thwart the majority of attempted attacks
While its reputation may not always reflect this truth, fostering economic resilience and the public good are by definition at the heart of the insurance industry’s raison d’être.
By insulating against unexpected financial loss, the sector allows businesses to confidently pursue innovation, investment and value creation. By constituting a vital safety net in the aftermath of a disaster such as a terrorist attack, it assists individuals, businesses and communities to quickly rebuild capacities by providing the compensation and emergency funds necessary to continue trading. Thus, it minimises potentially crippling business interruption.
For small and medium-sized enterprises in particular, the swift and uncomplicated payment of claims can make the difference between survival and default. For larger businesses, the prompt injection of hundreds of millions of pounds minimises the collateral damage to the affected community, particularly if it provides a systemic service or is a large employer.
Reaction to and resilience against violent extremism, however, must be reinforced by proper understanding of and subsequent mitigation against the threat. There are numerous ways for private insurers to achieve this, thereby supporting governments in their efforts to combat contemporary terrorism.
Reaction to and resilience against violent extremism, however, must be reinforced by proper understanding of and subsequent mitigation against the threat
In addition, the insurers help reduce the severity and frequency of terror-related claims made against the industry and direct the implementation of regulation around national terror resilience as opposed to merely reacting to future legislation.
For example, the industry is uniquely placed to diversify and thus share the risk, and retrocessional agreements, in which insurance companies provide services to each other, can equip the global market to comfortably absorb losses that would cripple domestic or even continental markets.
Further, the insurance sector should not underestimate its capacity to incentivise prudent behavioural change. By working closely with businesses, communities and the public sector, it can help to mitigate the impact of future attacks by advising insureds on the implementation of preventative risk management measures and counter-terrorism infrastructure.
Tools such as the Vulnerability Self-Assessment Tool (VSAT) launched in February 2018 by Pool Re and its members allow medium-size and large businesses to benchmark their existing terrorism risk management, and offers a premium discount to policy holders who implement proven and effective risk mitigation measures.
We believe that strong public-private partnerships are a key component in fostering financial resilience against catastrophe in whichever form
We believe that strong public-private partnerships are a key component in fostering financial resilience against catastrophe in whichever form. As such, we have collaborated with the UK Home Office on initiatives such as the Protective Security Improvement Activity (PSIA), and continue to support the UK Government’s CONTEST counter-terrorism strategy on their Crowded Places Programme, offering further discounts in return for improved security measures. In the event of an attack, these measures will protect lives, commerce and the national economy. We have also worked together with the universities of Cranfield and Cambridge on chemical, biological, radiological, nuclear (CBRN) and cyber risks to continue give rise to pioneering research and modelling techniques that can be shared through an international community of reinsurance pools committed to boosting resilience to terrorism around the world. Indeed, a global threat can be countered with nothing less than a global effort to understand and oppose it.
The insurance industry, of course, specialises in risk management, and our modelling of loss scenarios underpins much of our ability to underwrite complex exposures. Contemporary terrorism, however, is unique in the challenge it presents in this respect, combining a lack of historical precedent with a radically unpredictable future frequency and severity pattern to create an insurance supply gap which renders cities, economies and citizens across the globe vulnerable and under-insured.
As such, it is imperative for the private sector to harness the rigour and capabilities of research and academic institutions, build expertise around existing and emerging risks, and thus fill the supply gap not only to collect supplementary premium payments, but to boost global resilience to terrorism.
Violent extremism and its threat to our communities is a sad but unavoidable facet of the modern world. Governments alone can no longer be expected to shoulder its whole weight; it is time for the insurance industry to recognise that it has a pivotal role to play in thwarting a danger from which nobody can claim to be entirely safe.
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