Terrorism, Populist Politics Raise Risks for European Businesses: Aon Report

April 10, 2019

Europe faces an increasingly complex security environment, as Islamist and far-right terrorism creates new vulnerabilities for businesses and communities, according to new research from the broker Aon.

In 2019, the risk picture is further complicated by a resurgence of populist politics, which has encouraged potentially divisive policy shifts and may is some cases fuel extreme ideologies, while challenging Europe’s rule-based order, said Aon’s 2019 Risk Maps, developed in partnership with Continuum Economics and The Risk Advisory Group. The report annually examines political risk, terrorism and political violence around the world.

Populism, aided by subtle and divisive use of multi-media platforms, has gained ground and continues to spread,” said the report, pointing to the examples of Brexit in the UK; the Italian election result; as well as Presidents Donald Trump in the U.S., Andres Manuel Lopez Obrador in Mexico and Jair Bolsonaro in Brazil.

The report said that “rising populism and a lack of political consensus have undermined growth by hindering investment and stalling reforms.”

These issues are creating new risks for business, from the security of their employees and property in the face of increasing terrorism risk, to impacts on their supply chains and investments as a result of populist government policies, said the Aon report.

Aon said there is a range of risk management solutions – such as insurance protection – that organizations can use to respond to these challenging conditions.

Clients who can understand the potential loss exposure, across their asset and operational footprint, are in a better position to make informed decisions about finding the best terrorism and political violence insurance coverage for the right premium, the report indicated.

“Insurance coverage is available to protect business against both the threat and impact of terrorism, but also for more nuanced issues such as denial of access as part of a security operation, loss of attraction following a terrorist attack, or the impact from acts of violence where motives aren’t immediately apparent…,” said Scott Bolton, director, Crisis Management at Aon.

Coverage also can be broadened to include “malicious” loss triggers, he added.

“Businesses operating in territories where political risk is elevated should be considering insurance that covers against government decisions that can lead to contract cancellation, when measures are introduced to create barriers to trade, and against government action that curtails business operations and/or investments,” according to Sarah Taylor, head of Political Risk and Structured Credit at Aon.

“Reactionary populism in the political mainstream in several countries has given extremist fringes a sense of opportunity upon which to mobilize violent protests and intimidation around divisive political themes,” commented Henry Wilkinson, head of Intelligence & Analysis at the Risk Advisory Group.

“Far right terrorism remains a largely disorganized but growing threat. Businesses in Europe cannot be complacent about violent risks in traditionally stable markets. A comprehensive capability to monitor, assess and manage violent risks, is as essential as a violent risk transfer strategy,” he continued.

Key findings from the report include:

Terrorism
  • Terrorists are increasingly targeting public spaces and concentrations of people, exposing firms to potentially significant exposures.
  • Germany experienced a spike in far-right attacks and plots – with 23 incidents between 2016-2018, doubling previous numbers – but it is apparent that far-right terrorism and activism is on the rise throughout Europe.
  • Returning Islamic State fighters will present significant challenges to security services, businesses and communities across Europe.
  • Islamic State attacks in Europe and North America fell by half between 2017 and 2018, but rather than decline globally, the group has redirected its efforts elsewhere.
  • Sixteen percent of terrorist attacks in 2018 targeted or directly affected businesses.
Populism
  • Populism is no longer a fringe issue in Europe as 11 countries now have populist parties in government, while populist parties hold on average 22 percent of vote share across 33 European countries.
  • Where populist policies to lead to greater barriers to trade, this has increased the prospect of politically-motivated moves to frustrate established contracts, while forcing firms to consider their international supply chains as tariffs and trade barriers rise.
  • Anti-immigrant sentiment is one of the central tenets of many populist movements. This is likely to fuel further far-right terrorism and social tension.
  • Risks are also apparent for European firms operating globally, with regions such as sub-Saharan Africa and Latin America particularly exposed to government interventions that can impact firms’ ability to investment and trade internationally.

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