Two Members of the MMTA’s Insurance Task Force broached the very current and difficult topic of terrorism from an insurance perspective.
The Cost of Terrorism
In addition to the tragic loss of life related to acts of terrorism, there are also economic repercussions, including the disruption of production and a decline in investment. Economists have calculated that in many countries affected by terrorism including Nigeria and Israel, investment activities have reduced as a direct result of terrorism.
An analysis of the cost of September 11 conducted by The New York Times added up the physical damage ($55 billion) and the economic damage ($123 billion). It also included other costs: the cost of developing the Homeland Security Department ($589 billion), war funding ($1.6 trillion) and what was determined to be the continuing cost of those wars and taking care of veterans ($867 billion).
Tragically, time has not led to a decrease in terrorism, with 2014’s death toll from terrorism putting the global cost higher than that of the September 11 attacks. To put a price on terrorism, (see graph) the Institute for Economics and Peace calculates the value of property damage; say from a suicide bombing in a building, and the cost of death and injury, including medical care costs and lost earnings. It doesn’t take into account the increased number of security guards, higher insurance premiums, or city gridlock in the aftermath of an assault, or the other associated costs used for the September 11 analysis as mentioned above.
Terrorism is not a new phenomenon. Stories of indiscriminate terrorist attacks riddle the histories of our societies. Yet we are stricken more during some decades than others. Since September 2001, terrorist attacks or the fight against terrorist cells and organisations make front-page headlines almost weekly. This begs the question: How exposed is your business to this unpredictable, violent threat?
The latest terrorist attacks have been aimed at so-called soft targets: public spaces and events such as metros, museums and marathons. But at this moment an attack against vital infrastructures is seen as a realistic scenario, too. Large transport hubs such as harbours and airports can be targeted, causing not only extensive damage to property, but also causing massive delays in transport activities. Such an attack could severely disrupt your daily business.
Does your insurance policy cover such losses? For example, you may have a marine cargo insurance policy. This policy could contain a Termination of Transit clause (Terrorism) in combination with War & Strikes clauses. These provide only a limited type of coverage.
Terrorism in relation to insurance is an emerging topic and it is facing many types of (local) legislation. It is difficult to cover this topic on paper in only a few words.
The global insurance markets are continuously developing, monitoring and evaluating any possible insurance solutions. Yet, insurance policies exist which protect property damage and business interruption.
The insurance brokers of the MMTA Insurance Task Force are more than happy to provide assistance if you would like to review your existing insurance coverage and discuss various types of insurance solutions to protect your interests. If you would like to know more about the possible insurance solutions and/or discuss the specific situation of your company in detail, please feel free to contact the MMTA Insurance Task Force.
Erwin Slagter, Patrick Roodbol , H.W. Wood Limited
In an increasingly globalised world, where international trade is key to providing the resources for infrastructure development and economic growth, it is essential to consider the broad threats this can present. Today’s risk management involves strategic analysis of the political and economic climate, not only of your domiciled territory, but of all those in which the business operates throughout its network of operations.
Nowhere is this more clearly demonstrated than amongst commodity traders, where raw and manufactured products are shipped globally, exposed not only to the varying natural hazards, but to the vastly fluctuating country risks arising from political and economic instability. These frequently manifest themselves in exposure to political violence perils, from terrorism attacks on static assets (such as goods stored in port terminals), to war-like acts on commodities in transit (whether single carriage, convoy or at sea), to acts of marine piracy, where terrorist organisations have in the past used this approach to generate funding in pursuit of their ideologies.
The insurance market is keen to respond to the changing perils faced by our clients. Cargo war perils at sea and for goods in transit have traditionally been covered in the marine market, whilst storage of goods falls more within the remit of static terrorism & political violence insurers. Insurance brokers, such as Aon, seek to blend the covers in as seamless a way as possible, focusing on markets which can offer both static and marine coverage, utilising the most extensive wording forms based on enhanced forms of the market standard political violence wordings, institute cargo war clauses and institute cargo strikes clauses.
Helen Somerton, Scott Bolton & Walle Romijn , Aon Commodity Trade