The face of terror is changing. The first Lloyd’s terrorism insurance policies were written for IRA mail bombs in London during the 1980s, but what has changed since then hasn’t necessarily been reflected in insurance coverage.
Fast forward to last weekend when a global ransomware attack spreading through email painted a new picture of modern terrorism compared to the explosions using homemade devices of decades past. The future of terrorism coverage will need to consider the vast array of threats technology could pose according to Gordon Woo, a catastrophist at Risk Management Solutions.
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“Accompanying technological advances is an expanding catalog of terrorism scenarios, and terrorism insurance needs to address these new and evolving threats,” he said. “Drones pose a potential opportunity for terrorists to attack targets remotely. Payloads for the largest drones can be as much as 100kg. Their flight paths are restricted for security reasons, but they might be maliciously changed, perhaps by hackers.
“Cyber terrorism is an evolving threat. The most likely cyber terrorist attack modes would be those involving human casualties, such as might arise from derailing trains, causing ships to collide or run aground, or planes to crash. Many insurance companies have been studying the prospects of extending property damage insurance to included damage caused by cyber terrorist attacks.”
Then there’s the evolving nature of traditional terrorism attacks. Active shooters and extended states of emergency put organizations in different types of risk situations. Business interruption related to terrorism is one area where gaps in coverage could get closed by future policies.
“Businesses that do not experience a direct loss from a terrorist attack, but nevertheless experience some business interruption would benefit from extended terrorism insurance,” Woo continued. “For instance, following the November 13, 2015 attack of the Bataclan theater in Paris, the surrounding streets were closed off long enough to severely disrupt normal trading. french insurers are giving consideration to this type of extended business interruption coverage to increase urban resilience against terrorism.
“There has been a trend in the insurance industry meant to address ‘grey areas’ in insurance coverage. For example, Active Shooter Insurance programs are now available to provide coverage for liability resulting from attacks using deadly weapons, particularly in response to events like the Orlando shooting.”
Another trend in terrorism is the increased number of casualties contrasting with decreased damage to property.
“Unlike property insurance, certain types of insurance on people, such as workers’ compensation and life insurance, are unique in that there is generally no terrorism exclusion. Today, as terrorism attacks intentionally target civilians to maximize media publicity, interest is growing among health and disability insurers to offer specific terrorism cover in their policies, which may otherwise be excluded,” Woo said.
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