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DECEMBER 2019

 

CHANGING TIMES, A COMMODITISED MARKETPLACE, MISSING ADVICE & THE VALUE OF EXPERTISE:

 

Terrorism is not new; but it is changing.

 

It is an obvious fact that our counter terrorism efforts must respond accordingly and so must our insurances.

 

Terrorism is often talked about in sensationalist ways as if it is an entirely new challenge the world is facing. That is, of course, a fallacy. It’s understandable of course; years can go by with little or no incidents either globally, or on home soil, depending on your perspective. The shock when it does happen always makes it feel new.

 

When I was growing up, terrorism was (according to my perception and memory) a ‘Spanish/Basque Separatist problem’ as well as a British one. It was all about the IRA and ETA. There were other incidents around the world, but as an ‘x’ year old, these were the ones I was aware of. They were the incidents the media had real access to and the ones which were reported most frequently. Media coverage and its role in perception of terrorism is for another article perhaps and the concepts and impact of ‘distance’ and ‘detachment’ is another discussion altogether, and again, perhaps one for another article. Nevertheless, the sometimes uncomfortable proximity of the IRA attacks served to bring the issue in to focus for many people, being of course, a little closer to home.

 

This is just a snapshot in time, viewed through the time-fogged lenses of a boy growing up in Kent who didn’t take a keen interest at the time. Look at a similar snapshot now, and its completely different… but not so different; everything changes and nothing changes. Terrorism, whichever strict definition you favour, has existed in various forms for many generations. The threats we face from terrorism, regardless of the underlying cause or goal, have morphed and evolved and it has thus been the ongoing challenge of counter-terrorism efforts and insurers to understand those threats and to react to the risk in a measured and appropriate way.

 

Who does this affect and why should we care?

 

This means a variety of things depending on who you are and what your responsibilities and interests are. For the traveller, it means considering the implications in terms of the environment you are travelling to. For a business owner, open to the public, it might mean considering any measures that might be taken to keep your staff and patrons safe. For infrastructure managers, it will likely mean that disaster recovery plans and coping mechanisms and emergency state procedures need to be put in place in respect of a terrorism incident. From an emergency services and indeed intelligence point of view, the interest and implications are obvious.

 

Where they are perhaps not so obvious are the interests of insurance buyers and the responsibilities of insurance professionals, especially those client facing, giving advice.

 

An overlooked or neglected gap in advice and coverage?

 

Whilst the threat of terrorism is considered and appreciated by many types of people and organisations directly potentially affected by terrorism, it is often demonstrably inadequately understood, or at least inadequately explained by insurance professionals which by extension is inadequately understood and appreciated by the clients they advise.

 

With the rise of aggregator websites, increasingly transactional platforms and commoditised product and with real advice ‘disappearing’ quickly from certain sectors of the UK insurance market, where brokers are used, they are valued for the service and advice they can provide. Otherwise, why bother? As with all financial services, it is the intangibles which count. It’s the advice, the service, the knowledge and the insight which differentiates brokers. If the broker is not informed and is not in a position to offer ‘best advice’ then why use them as opposed to another broker? Or not bother with a broker at all?

 

What chance do insurance buyers have if their brokers do not fully appreciate and understand the threat of terrorism and the insurance products available? How can the client make an informed purchase when broker advice is either missing or lacking clarity?

 

There is real value of expert advice in an increasingly commoditised and transactional field.

 

The threat of terrorism is something that should be considered along with other more immediately obvious and standard, traditional perils. It should not simply be ignored. Even where the end decision is not to purchase the cover; it’s imperative that the decision is made in a conscious fashion. It is no longer sufficient to simply assume that the cover is not required, and where it is, there are flexible options outside of the easy, default route. By taking the time to consider this risk and the nature of the cover required and by engaging with the experts at TriStar Special Risks Ltd, brokers can offer a proactive and flexible solution.

 

There is an opportunity for the informed and proactive broker to capitalise in what is currently an under-served market in terms of real broker advice. TriStar Special Risks Ltd invites enterprising brokers to take advantage of our product, service and underwriting expertise to provide better advice, protection and solutions for your clients.

 

This is the first in a series of articles which will seek to discuss what terrorism is, how it is changing, how terrorism insurances must change and what factors might influence how we discuss terrorism insurance with clients. This is very much the tip of the iceberg and serves as an introduction to the subject only. My aim is to educate and facilitate easy discussion of what I see as the issues that society faces and by extension insurance industry faces and how TriStar Special Risks Ltd aims to provide assistance in collaborating with partner brokers to create solutions together.

 

© 2019 Tristar Special Risks

 

 


 

NOVEMBER 2019

 

WHAT IS TERRORISM?

 

We all have our own ideas, preconceptions and images of what terrorism is, but what does it really mean?

 

Terrorism is an evocative word which conjures up ideas, images, feelings and emotional responses in all of us; likely different for each individual; but what does it mean? It likely means something slightly different to each of us and if all asked to offer a definition, its likely that a very wide variety of ideas would emerge.

 

It is then both startling, but also fairly unsurprising on reflection, that at the time of writing there is still no universally accepted international definition of ‘terrorism’. It is a word that arguably has pejorative undertones and many media outlets are reluctant to use the descriptor ‘terrorist’ often preferring one of a number of other words; ‘insurgent’, ‘extremist’, ‘guerilla’, ‘militant.’ As Andrew Silke points out in his book ‘terrorism; all that matters,’ a long-standing truism transcends the question; ‘one man’s terrorism is another man’s freedom fighter.’ We are left then with two clear conclusions.

  1. Perspective, agenda and discourse! What you see depends upon where you stand. Much like perspective on any subject, there is always more than one view. Whether someone is a ‘terrorist’, an organisation is ‘terrorist’ in nature or an act is an ‘Act of Terrorism,’ is unlikely to always produce a consensus.
  2. Whilst we all have preconceived ideas of what terrorism is, this is not always easy to formally express or define; more of an ‘I know it when I see it’ situation… but what criteria are being subconsciously used?

So where does this leave us? And why do definitions matter?

 

It remains important to define ‘terrorism’ for a number of reasons, some of which include national security, policing and international relations, but putting these aside, we are going to focus on risk management and insurance. Clearly, the insured needs contract certainty and clarity around the issue of what is covered and we handle this through use of a definition of ‘terrorism’ or an ‘Act of Terrorism’

 

There are various terrorism insurances available, both the default, standard mechanism and the offerings outside of that offering. This article comments only on the policy, definition and coverage offered by TriStar Special Risks Ltd. All other terrorism insurance offerings will include their own definition.

 

TriStar Special Risks Ltd offers cover against damage caused by an Act of Terrorism, extending to include non-damage business interruption/denial of access caused by an Act of Terrorism within a 1 mile radius. The definition does not rely upon any classification of an incident as an Act of Terrorism by the Government/Home Office.

 

Here is the definition within the policy wording of an ‘Act of Terrorism’:

 

An act of Terrorism means an act, including the use of force or violence, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s), committed for political, religious or ideological purposes including the intention to influence any government and/or to put the public in fear for such purpose

 

For the sake of those curious about the more general, non-insurance definition of ‘terrorism’ and ‘terrorist’; I thought I’d include the following, which is the definition(s) provided by the Oxford Dictionary. It may be an interesting exercise to compare this to your own definition or thoughts. My own thoughts are that the Oxford Dictionary ties the definition in very tightly to ‘political aims’, whilst the TriStar Special Risks Ltd definition more accurately reflects the wider picture, including specific mention of political, religious and ideological purposes.

 

Terrorism (according to Oxford English Dictionary):

 

NOUN: The unlawful use of violence and intimidation, especially against civilians, in the pursuit of political aims.

 

Terrorist (according to Oxford English Dictionary):

 

NOUN: A person who uses unlawful violence and intimidation, especially against civilians, in the pursuit of political aims.

 

ADJECTIVE: Unlawfully using violence and intimidation, especially against civilians, in the pursuit of political aims.

 

There is an opportunity for the informed and proactive broker to capitalise in what is currently an under-served market in terms of real broker advice. TriStar Special Risks Ltd invites enterprising brokers to take advantage of our product, service and underwriting expertise to provide better advice, protection and solutions for your clients.

 

If you are interested in learning more about this subject, have any questions or would like to know how TriStar Special Risks Ltd can help you, please do get in touch.

 

© 2019 Tristar Special Risks

 

 


 

OCTOBER 2019

 

TERRORISM INSURANCE BUYERS: THE INFORMED & THE OBLIGED

 

A brief exploration of what conscious and sub-conscious considerations affect decision making around insuring against terrorism or not.

 

In previous articles we have considered how terrorism has changed and is changing as a phenomenon and what terrorism really means (including how it is formally defined) and why both those considerations are important to us as insurance professionals. In this article, we consider the motivations for opting to protect against terrorism and purchase terrorism insurance. We will also briefly consider the possible reasons for opting against buying coverage and why in some cases, these may be based on dangerous or precarious assumptions.

 

It is an obvious point to make that a brief article will always be necessarily general in nature and that the following does not account for all terrorism insurance buying motivations and behaviours, but its certainly true for many clients.

 

So what different motivations are there for an terrorism insurance buyer to buy the cover? What is the typical profile of a terrorism insurance buyer?

 

I would posit that there are two main camps in to which most terrorism insurance buyers fit; the informed and the obliged; or perhaps, those that want it and those that need it.

 

The informed are aware of the threat of terrorism and of the terrorism exclusions which will apply to most (not all) policies, unless specifically arranged and insured. They have likely considered the location and type of their risk and exposure and have made the conscious decision to purchase insurance since they prefer the known cost of an insurance policy to the unknown potential cost of an act of terrorism.

 

The obliged (whilst they may also be informed) are forced to arrange coverage due to contractual or legal obligations; most often as the result of a covenant or perhaps a contract agreed in the course of borrowing money against an asset, most commonly a mortgage against a building. In the case of there being conditions upon a mortgage or a commercial loan, lenders will have their own criteria for deciding if coverage must be in place and those criteria are by no means standardised or shared across lenders. Some lenders very rarely insist on the coverage, even in large cities, whilst others insist on the coverage even outside of large city centres.

 

In the case of obligation by covenant or legal obligation, one example might be a property management company or similar organisation responsible for arranging coverage on behalf of others for a ‘shared asset.’ In the case of a large block of flats, with a management company, RTM, managing agent or similar managing the property and arranging coverage, they are purchasing that cover on behalf of many parties and its very likely that they are obliged by covenant or similar to insure against ‘explosion’. This is important since it can result in an accidental or overlooked gap in coverage, if they then neglect to insure against terrorism. There is an important piece of case law here; in the landmark case of QDime Ltd v Bath Building (Swindon) Management Company Ltd (2014). The court ruling upheld that where a contract includes a requirement any insurance must include ‘explosion’ , then this should be understood to include terrorism. Explosion is typically required to be covered (although we should remember, it’s the specific terms of the individual contract in place which will govern this Written and published by James Woolerton BA (Hons) ACII, MD TriStar Special Risks Ltd – May not be reproduced without consent and these naturally differ from case to case). Where it is required, there is a direct and clear duty for the property management company or similar arranging the cover to insure against terrorism.

 

It is true that there are a large number of organisation and individuals who opt against insuring against terrorism. The circumstances of each and unique and there is nothing to say that the decision is wrong, but in some cases that decision is based on some spurious or misguided assumptions. I believe that its important to challenge these such that where a client is making the decision not to have any terrorism cover in place; this is at least an informed decision.

 

So what are some of these potentially dangerous misconceptions?

 

My property/business is not in London, and so I will not suffer a loss.

 

There have been well publicised incidents in a number of UK cities, as well as arrests made provincially, in regions not ordinarily associated with terrorism. An incident could occur anywhere.

 

My property/business will not be a target.

 

It doesn’t matter. Claims might more often be BI based; with authorities restricting access to an area in the aftermath of an incident; causing a denial of access. A direct, targeted, property damage ‘blast’ type attack might be the popular image of terrorism, but its not the only way a loss can be incurred. Coverage is available for non-damage business interruption and denial of access up to a 1 mile radius.

 

It’s a waste of money/it’s too expensive?

 

Terrorism has a low frequency, high severity profile. In the case of having no terrorism coverage at all, and an outstanding mortgage/commercial loan or similar against a building, can you afford to repay the loan if the building were destroyed and you became deprived of that asset? In a business continuity scenario; can a business afford the uninsured loss in trading activity for what could be a prolonged period depending on the nature and severity of the attack.

 

The State/Government will just pay for any losses/damages?

 

Not for me to speculate on, but likely a dangerous assumption.

 

In conclusion, as a closing comment, there are varied motivations for buying terrorism insurance and it’s likely that some of that is reluctant on behalf of the insurance buyer. The key area where the insurance industry needs to educate potential clients, in my view, is in educating them regarding their obligations and perhaps also challenging some misconceptions about their exposure.

 

There is an opportunity for the informed and proactive broker to capitalise in what is currently an under-served market in terms of real broker advice. TriStar Special Risks Ltd invites enterprising brokers to take advantage of our product, service and underwriting expertise to provide better advice, protection and solutions for your clients.

 

If you are interested in learning more about this subject, have any questions or would like to know how TriStar Special Risks Ltd can help you, please do get in touch.

 

© 2019 Tristar Special Risks

 

 

 

THE LATEST FROM TRISTAR SPECIAL RISKS

 

CHANGING TIMES, A COMMODITISED MARKETPLACE, MISSING ADVICE & THE VALUE OF EXPERTISE

 

WHAT IS TERRORISM?

 

TERRORISM INSURANCE BUYERS: THE INFORMED & THE OBLIGED

 

James

 

Written and published by

James Woolerton, BA (Hons) ACII Managing Director TriStar Special Risks Limited – The Specialists in Terrorism Insurance Solutions

underwriting@tristarspecialrisks.com

 

 

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