Risk Insight
Managing the evolving
risk of terrorism
Understanding and mitigating against the changing
risk of terrorism in the leisure, hospitality, retail and
property/real estate industries.
The UK has longstanding experience of living with the
threat of terrorism. However, in recent years the threat has
increased and the targets and tactics have mutated from
‘traditional’ sources’ targets and tactics.
Today, crowded places are – and will remain – attractive
targets for international and ‘home grown’ terrorists and so
an important element of any counter-terrorist strategy is to
create safer places and buildings that are less vulnerable to
a terrorist attack. Should an attack take place – there are
measures that can be taken to lessen its impact.
Today, there is a growing awareness by companies in the
leisure, hospitality retail and property/real estate sectors
that the changing terrorist threat puts them at greater
risk. Crowded places – both public and private – are
liable to terrorist attacks by virtue of its crowd density
include sports stadia, pubs, clubs, bars, shopping centres,
high streets, visitor attractions, cinemas, theatres and
commercial centres.
A crowded place will not necessarily be crowded at all
times – crowd densities may vary during the day or night,
and may be temporary, as in the case of sporting events or
open air festivals. Therefore, the risk is far greater at certain
times such as rush hour and peak shopping periods.
Despite the growing acceptance of the evolving terrorist
activity, many organisations still significantly underestimate
their potential exposure to the related risks and losses –
even if they are not directly impacted by an incident.
The Paris attacks in November 2015 are evidence of one
of the new forms of threat: terrorists used automatic
machine guns and explosive devices to target sports and
music events – as well as random attacks on bars and
restaurants. Those ‘complex’, synchronised attacks were
planned by individuals with links to organised groups based
in Syria but there have also been examples of ‘lone wolf’
attacks, in which radicalised individuals are inspired by
these organised groups but have no direct links – such
as the 2016 attacks on the Pulse nightclub in Florida in
June and the Nice lorry incident in July 2016. In the UK the
government rates the threat of these styles of attacks at
severe and has also raised the threat of terrorist attack
stemming from Northern Ireland as substantial.
The human and financial cost of terrorism is growing rapidly.
The Institute of Economics and Peace has estimated the
direct cost of terrorism to the global economy in 2014 was
$52.9 billion – a ten-fold increase since 2000 – and the
indirect costs at $105 billion. As the tactics of terrorists
changes to inflict maximum damage on ‘soft targets’, the
leisure, hospitality, retail and property/real estate industries
are becoming increasingly exposed not just to the direct
effects of events but from indirect exposures from terrorism
elsewhere. For example, the Paris attacks in November
2015 ultimately paralysed Brussels’ tourism and retail
sectors some 320 kilometres away and have had a lasting
impact on the city’s commerce. Many UK companies are
unaware – or have underestimated – the financial losses
that could occur if a key supplier or business partner (in the
UK or internationally) was unable to operate for a significant
period of time.
“D espite the growing acceptance of the
evolving terrorist activity, many organisations
still significantly underestimate their potential
exposure to the related risks and losses –
even if they are not directly impacted by
an incident.”
Counter Terrorism – managing the risks
Companies can’t predict all possible threats to their
business. However, by working through a range of
potential scenarios and consequences it is possible
to make informed judgements and set appropriate
priorities. The following four-step process is an
effective way for companies to think about improving
the management of these risks.
Step three: identify measures to reduce risk.
Companies should introduce new measures (that are
proportionate to the threat), which:
a.Deter would-be terrorists (by providing physical and
electronic security measures, coupled with good
management practices);
Step one: identify the threats.
b.Aid detection of intrusion (by providing alarm and
visual detection systems with verification); and
Understand terrorists’ intentions and capabilities, what
they might do and how they might act is a crucial first
step to assessing potential threats.
c.Delay any intrusions (for a sufficient period of time to
allow a response force to attend– by putting in place
physical security measures).
Step two: decide what you need to do to
protect and identify your vulnerabilities. Step four: continually review your security
measures.
Your priorities should fall under the following categories:
Security and contingency plans should be rehearsed
and reviewed on a regular basis to ensure they remain
accurate, workable and up-to-date.
People (staff, visitors, customers, contractors,
a.
general public);
b.
Physical assets (buildings, contents, equipment,
plans and sensitive materials);
c.
Information (electronic and paper data);
Processes (supply chains, critical procedures) the
d.
actual operational process and essential services
required to support it.
Below is an example of a checklist that clients can
use as a framework to assess potential threats and
mitigate risks. Such policies not only reduce the
chance of terrorist threats but can also lower insurance
premiums through the demonstration of a proactive
risk management approach.
Counter-terrorism design principles
Examples of measures
Better blast resistance
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external barriers or a strengthened perimeter to prevent a penetrative (ramming) or
close proximity (parked or encroachment) attack;
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use of building materials which reduce the risk of fragmentation including
blast resistant glazing and structural design which reduces the risk of building
collapse; and
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install doors and locks which are better able to withstand entry from armed
intruders and provide robust ground floor facade material, which together will help
to provide cover for people caught up in a firearms attack.
Better building management facilities
ƒƒ
entrance arrangements which resist hostile entry;
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the separation of general heating, ventilation and air conditioning systems for entrance
areas, delivery areas and mailrooms from those occupying the main occupied spaces;
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air intakes that are in a secure area and above first floor level;
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hazardous material stores that are at a safe distance from the building; and
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communications systems (e.g. public address systems) installed to pass on advice to
those caught up in a firearms attack.
Better traffic management and hostile
vehicle mitigation measures
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structural measures that prevent access to, or close proximity of, unscreened vehicles
to the building or space; and
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measures that reduce the speed of vehicles approaching the site or its defences, like
bends or chicanes.
Better oversight
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clear lines of sight around a building;
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absence of recesses on the façade or elevations of a building;
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uncluttered street furniture;
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well maintained and managed litter-free building areas that reduce the opportunity for
suspicious hidden items and suspect activity to go unnoticed;
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CCTV and security guarding to provide formal oversight;
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orientating the building so that it overlooks public space and neighbouring buildings to
support informal oversight by those who use and visit the location; and
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well-managed access points and reception facilities that offer less opportunity for
intruders to go undetected and may deter them from taking further action.
2 willistowerswatson.com
Insurance as a financial risk transfer solution
New strategies
Since the IRA attack on the Baltic Exchange in London in
1993, the UK established a mutual government reinsurer,
Pool Re, to provide a backstop to insurers that offers
terrorism cover on business property and business
interruption policies. This has worked well and despite
£600 million of claims from 13 separate incidents there has
been no use of public money. The strategy was in response
to the concentration risk of very large terrorist events but
the evolving threat is less focused on creating physical
damage and more about achieving high loss of life in
vulnerable public spaces for propaganda purposes.
New threats and new risks require new solutions. The private
market is responding to these new risks and Willis Towers
Watson is working with clients in the leisure, hospitality, retail
and property/ real estate Industries to implement strategies
that mitigate risks and exposures on both a pre- and postevent basis.
Terrorism-related risks to be considered include:
ƒƒ
Event or site-specific risks.
ƒƒ
Duty of care (domestic and international) for employees
ƒƒ
Business interruption/continuity risks
The traditional focus on Property & Casualty (P&C) damage –
including property damage triggers for business interruption –
increasingly fails to cover the types of risk from the changing
terrorist threat. The Pool Re strategy was in response to the
concentration of financial P&C risk from very large terrorist
events. However, the leisure, hospitality, retail and property/
real estate industries are at the forefront of the evolving
terrorist threat which targets vulnerable, low-security
locations and events that have large concentrations of
civilians, with the aim of inflicting the highest possible number
of deaths.
ƒƒ
Reputational risks.
Also, the increasingly interconnected nature of global
commerce means that an incident in a completely different
part of the world can have far-reaching consequences. UK
organisations are not only exposed to events in the domestic
market but many also have international exposures through
the global reach of their business activities.
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‘Active-shooter’ policies – covering incidents that may or
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Third party risks (e.g. supply chains).
As well as working with clients to ensure risks are properly
quantified and mitigated as far as possible, we also work
with insurance providers who are innovating terrorismrelated cover, including:
ƒƒ
Updated Impairment of Access policies (covering
damages from hoaxes with no requirement for a
property-damage trigger and cover gross earnings losses
from terrorist events or scares).
may not have political or religious motives.
ƒƒ
Loss of Attraction.
The fallout from the change of consumer behaviour
can also hit companies that are not directly affected
by events in the aftermath of a terrorist attack. At least
one international insurer has responded to this threat by
offering a contingent Loss of Attraction cover.
Risk Insight – Changing risk of terrorism 3
Contact
Please do not hesitate to contact us to discuss your leisure & hospitality, retail and real estate/property risk management
and insurance strategy further and find out how we can help you implement the right approach for your business:
Kelvyn Sampson
UK Industry Practice Leader – Retail and Leisure & Hospitality
T: +44 (0)147 322 2990
E: [email protected]
Terri Clark
Account Director, Leisure & Hospitality Practice
T: +44 (0)20 3124 6059
E: [email protected]
Paul Turnbull
Account Director, Real Estate Practice
T: +44 (0)20 3124 6253
E: [email protected]
James Borrie
Executive Director, Terrorism Practice
T: +44 (0)20 3124 6518
E: [email protected]
Willis Limited, Registered number: 181116 England and Wales.
Registered address: 51 Lime Street, London, EC3M 7DQ.
A Lloyd’s Broker. Authorised and regulated by the Financial Conduct
Authority for its general insurance mediation activities only.
FP2102/16093/08/16
willistowerswatson.com
SCR
Henry Tuggey Head of Alert24
Special Contingency Risks Limited (SCR)
T: +44 (0)20 7088 9148
E: [email protected]