Paris Terror Attacks Not Unexpected; Demand for Political Risk Cover Is Up

Terrorism, security and political risk experts from Willis provided some broad observations about last week’s terror attacks in Paris and how insurance buyers are responding.

“The tragic events in Paris are a continuation of a pattern that has been proliferating ideologically and spreading geographically over the last decade and which is not expected to diminish in the near future,” according to Tim Holt, head of intelligence at Alert:24, which is part of Willis’s Special Contingency Risks (SCR) unit.

“Analysts estimate that more than 5,000 people were killed in jihadi attacks across the globe in November 2014 alone,” said Holt in a blog issued on January 13, 2015 entitled “Paris Terror Attacks Tragic but not Unexpected.”

“Companies in France are strongly recommended to follow official government directives,” he said. “Meanwhile, organizations around the world should maintain an understanding of the threat level either through publicly available information or through dialogue with host nations.”

“Political instability continues to rise across the globe which has resulted in a heightened awareness generally among risk managers and investors alike,” according to Andrew van den Born, executive director in Willis’ Political and Trade Credit Risk Practice.

“Demand for political risk insurance – which protects against the physical damage and disruption caused by politically motivated violence – is on the increase,” he said. “This is matched by an increase in capacity. In fact, a surfeit of capacity in the market has resulted in recent years in a fall in price, which is at odds with the increased risk landscape.”

James Borrie, executive director in Willis’ Terrorism Practice, noted there has not yet been any increase in demand for stand-alone terrorism insurance as a result of these attacks.

“Europe has been on a ‘severe’ threat level for some time now, meaning that a terrorist attack is highly likely,” Borrie said, noting that in the UK, the terror threat level has not yet been raised to “critical,” its most serious.

“Commercial insurance buyers in Europe have been aware of the threat posed by international and home-grown terrorists for some time and have made insurance purchasing decisions based on that,” he continued.

“Meanwhile, there is excess capacity in the insurance markets which will prevent premiums for terrorism insurance increasing, at least in the short term,” according to Borrie. “Most French insured’s have access to the country’s highly successful terrorism pool, GAREAT, via their property insurer. The pool is reinsured by Lloyd’s.”

According to Holt’s blog, France has responded strongly to the attacks by implementing “Vigipirate,” a security protocol that reinforces protection at a number of key sites:

More analysis of the Paris attacks is available on Holt’s WillisWire blog.

Source: Willis