Aon: Businesses Must Not Ignore Terrorism Risk

April 19, 2005

Regardless of whether or not the U.S. Federal Government authorizes an extension to TRIA (Terrorism Risk Insurance Act) beyond the end of this year, terrorism remains a very real threat and should not be ignored.

According to Aon’s 2005 Terrorism Risk Map, presented at the RIMS annual conference, terrorist activity is making the world a riskier place in which to do business. The map assesses the level and nature of terrorist threat around the world and is the third in an annual series.

This year, 31 countries have received higher terrorism risk ratings than
last year, almost half (48%) of which are in Western Europe. Among these, the Netherlands, Germany, Belgium and Denmark have all been marked as higher risk because of increased Islamic extremist activity. The most recent manifestation of this was the murder of filmmaker Theo Van Gogh in November 2004 by a Dutch Moroccan Islamic extremist.

The U.S. rating of ‘elevated’ remains unchanged from last year. In fact, 27 terrorist incidents (albeit minor) occurred in the U.S. during 2004. Similarly, fears that Islamic extremists might stage attacks to try to influence the UK general election on 5 May also reinforce the UK’s risk rating.

The Terrorism Risk Map shows that participation in the U.S.-led Iraq
coalition has increased terrorism risk in countries such as Australia, Poland and Estonia. There is concern that Al-Qaida and other international terrorist organizations could take advantage of anti-western sentiment and launch terrorist attacks in these countries in future.

Businesses which originate from these countries should also be aware of threats to their operations and personnel abroad as evidenced by incidents such as the terrorist attack on the Australian embassy in Indonesia, the recent bombing of a British theater and school in Qatar and the thwarted plot to blow up the Italian embassy in Lebanon.

“Terrorism is not a new threat and many international businesses have to date been rightly pre-occupied with the risks facing their operations in the Middle East, Africa and the Gulf. Although companies do need to be aware of the global picture, the 2005 map highlights the need for vigilance in so called ‘safer’ European countries,” commented Paul Bassett, executive director in Aon’s Crisis Management division.

“Companies must acquire as much knowledge as possible about the risks they face and their exposure to those risks in order to minimize the human and financial impact of such attacks. Businesses can then assess how best to allocate their expenditure on insurance and counter terrorism risk management procedures effectively,” he added.

Efforts by the insurance market to press the U.S. Federal Government for reauthorization of TRIA are intensifying as the deadline for its expiration draws nearer.

With the uncertainty surrounding TRIA, Aon is urging its clients to join the lobbying.

“But, more importantly,” said Aaron Davis, vice president of Aon’ s Property Syndication Group in the U.S., “if TRIA does expire at the end of this year the aggregate capacity of the stand-alone terrorism market is going to come under severe strain. Businesses need to explore alternative options for mitigating and transferring their terrorism risks now.”

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