28/01/2016

Expert Views: the changing aspects of managing terrorism risk

Terrorism has been a threat for some years and materialised sadly in France several times in 2015. We are facing a situation where victims of an attack in France (whatever their nationality) will be indemnified by state funds, either existing or through free access to medical services which was recently decided.

This is an expert view from Ms. Anne-Marie Fournier, board member of AMRAE and Risk Manager of luxury brands group, KERING

Employers have to take decisions on the protection of employees and security departments in industrial or commercial services companies decide on most appropriate measures depending on location, activity, reputation, etc. Most industries are checking more carefully all persons entering their locations and probably also checking many sensitive areas like for example crucial data of the company.

Regarding property damage and consequential business interruption (PD/BI), insurers underwriting PD/BI covers have an obligation to provide terrorism cover. As a counterpart of this mandatory cover, insurers access a global reinsurance scheme administered by GAREAT, a pool launched on 1 January 2002. GAREAT organises the tariff and reinsurance of this exposure with the commercial insurance market and through French state funds for “unlimited treaties” reinsured through the Caisse Centrale de Réassurance.

Unfortunately GAREAT has no dedicated reserves, as all premiums are transferred to the market reinsuring the terrorism exposures. As a consequence, there is a limited possibility of action in order to answer current needs for cover for “financial losses” without property damage. For example, activities that closed by prudence in the days following the recent attacks cannot benefit from business interruption cover if they have not suffered any property damage.

There are many activities with large numbers of visitors or participants which have cancelled activities and closed locations by prudence and have no insurance for these financial losses.

AMRAE would encourage this system to be reconsidered in order to leave the commercial market free to deliver the cover that it does elsewhere. There is hardly any other mandatory state schemes for terrorism insurance in the world; (many are optional.) The state-backed scheme could then concentrate on losses which cannot be obtained from commercial markets: nuclear, biological and chemical (NBC), pure financial losses, unlimited cover over €2B, etc.

Additional resources:
AMRAE resilience attentats (French)