Charlie Hebdo: What Would Be the Implications of a Similar Attack in the UK?

Posted by on January 20, 2015 | Be the First to Comment

paris-not-afraid_Photo Heathcliff O'MalleyThe Telegraph

Protestors in Place De La Republique in the centre of Paris after the Charlie Hebdo attack.
Photo by Heathcliff O’Malley, The Telegraph

 

The attacks in Paris were horrific, and have shaken France to the core. However, the implications for risk managers are limited. Apart from checking that their normal emergency response plans and security arrangements are in place, there is very little that they need to do differently to prepare their organisation for another similar attack.

The recent terrorist attacks by Islamist extremists on the satirical French magazine, Charlie Hebdo, and the killing of four people in a supermarket outside Paris, have been labelled the most deadly act of terrorism on French soil since the Algerian war. It is probably safe to acknowledge that the terrorists achieved their aims: they caused panic and outrage with their unexpected and indiscriminate killings of innocent people going about their day-to-day business.

Major cities are on high alert for similar attacks in the coming weeks after the thwarting of a major attack the next day in Verviers, Belgium.

Over the past few years, counter-terrorist operations have apparently prevented a number of 9/11-type attacks. These catastrophic events – what are called ‘spectaculars’ – have a big impact on insurers and our clients because they cause a lot of physical damage.

It would seem that we have now arrived at a stage where al-Qaeda is relying much more on its affiliates and allies to carry out ‘home-grown’ terrorist attacks. These are probably cheaper and easier to carry out than 9/11-style events, but have devastating human consequences and loss of life. As we saw in Paris, the physical damage was limited. We are likely to see more of these sorts of attacks in the future.

Since 9/11, the standalone terrorism insurance market has been established. It is able to cover another large-scale terrorist event that causes extensive physical damage. Those larger-scale events will remain covered.

The market is now bracing itself for incidents that are atypical and that cause non-physical damage, suffering monetary losses from denial of access or business interruption. We can expect to see new insurance products cater for the higher likelihood of smaller, more local attacks.

For more information, please speak to your usual Lockton contact, or contact me at +44 (0) 207 933 2291 or david.cheales@uk.lockton.com.

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Special Update: TRIA Extension Signed into Law by President Obama

Posted by on January 13, 2015 | Be the First to Comment

obama_bill_signing

On January 12, US President Barack Obama signed into law a six-year reauthorization of the Terrorism Risk Insurance Act (TRIA). Clearing the way for the president’s signature, the House and Senate passed the act on January 8, after the preceding Congress failed to do so prior to adjourning in late December. This left the Federal backstop to expire on December 31, 2014.

What is TRIA?
Established following the events of September 11, 2001, TRIA provides a US government backstop for traditional insurers and US-based captive insurers for extreme, high-level terrorism losses. It has helped to create and maintain a stable market for terrorism coverage.

What Does This Mean for Your Insurance Program?
The law amends the prior TRIA expiration date from December 31, 2014 to December 31, 2020. This alleviates the uncertainty surrounding conditional policy language that allowed for cancellation, exclusion, or re-rating in the event of a TRIA non-renewal on December 31, 2014.

What Does This Mean for the Insurance Industry?
The law:

  • Increases the total loss amount required for TRIA to assist from $100 million to $200 million, at a rate of $20 million each year beginning in 2016
  • Raises the federal government’s mandatory recoupment from $27.5 billion to $37.5 billion, at a rate of $2 billion each year beginning in 2016
  • Raises the private industry recoupment total for all events from 133 percent of covered losses to 140 percent

While TRIA’s December 31, 2014 expiration was unexpected, most carriers avoided any knee-jerk reactions in favor of exhibiting patience and confidence that the new Congress would act. The industry had spent months preparing for the changes contemplated in previously proposed legislation such as an increased financial trigger for government reimbursement and higher carrier retentions. The general sentiment is that capacity and pricing will remain stable with the Act’s passage into law.

How Lockton Can Help
Lockton has dedicated experts prepared to address any unique circumstances and coverage needs relating to this issue. The official extension of TRIA mitigates the financial burden borne by insurers and US-domiciled captives, but it does not eliminate the risk of an event itself. Clients are encouraged to continue to be mindful of terrorism exposure and to consult with their Lockton team.

 

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TRIA Extension Passes House and Senate

Posted by on January 8, 2015 | Be the First to Comment

US Congress Night

On January 8, the 114th Congress addressed the “unfinished business” of the preceding Congress, which adjourned in late December without renewing the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA)*, leaving the Federal backstop to expire on December 31, 2014. The House and Senate acted quickly in the first week of the new Session, and the six-year TRIA extension passed with an overwhelming majority. US President Barack Obama is expected to sign the bill (H.R. 26) into law.

What is TRIA?
Established following the events of September 11, 2001, TRIA provides a US government backstop for traditional insurers and US-based captive insurers for extreme, high-level terrorism losses. It has helped to create and maintain a stable market for terrorism coverage.

What Does This Mean for Your Insurance Program?
Lawmakers have suggested their intent is to have the effective date of the extension to be retroactive to January 1, 2015. This would alleviate the uncertainty surrounding conditional policy language that allowed for cancellation, exclusion, or re-rating in the event of a TRIA non-renewal on December 31.

What Does This Mean for the Insurance Industry?
While the law’s December 31 expiration was unexpected, the industry continued to express optimism that TRIA legislation would pass in early January. As such, most carriers avoided any knee-jerk reactions in favor of exhibiting patience and confidence that the new Congress would act. The industry had already spent months preparing for the changes contemplated in previously proposed TRIPRA legislation such as an increased financial trigger for government reimbursement and higher carrier retentions. The general sentiment is that capacity and pricing will remain stable following the Act’s passage.

How Lockton Can Help
Lockton has dedicated experts prepared to address any unique circumstances and coverage needs relating to this issue. The vote to reinstate and extend TRIA mitigates the financial burden borne by insurers and US-domiciled captives. However, it does not eliminate the risk of an event itself. Clients are encouraged to continue to be mindful of terrorism exposure and to consult with their Lockton team.

*TRIA was the original coverage in place. TRIPRA refers to the reauthorization of the program that has been passed by Congress.

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Underground Storage Tanks: A Changing Marketplace

Posted by on January 7, 2015 | Be the First to Comment

White-Paper-Hero_Underground-Storage-Tanks

The environmental insurance marketplace has never seen more capacity and competition than now. Yet today, we see the market at the brink of change, especially when dealing with small portfolios with Underground Storage Tanks (USTs) more than 25 years old.

Over the last few months, the industry has seen deductibles and premiums rise, with carriers looking to collateralize retentions and some insurance companies nonrenewing their books of business. The writing of Financial Assurance for USTs is becoming more and more cumbersome.

Owners and operators of newer tanks can still expect competitive renewals with affordable premiums and low deductibles. However, for older tank systems, deductibles can quickly grow more than $50,000 per claim and, in extreme cases, closer to $1,000,000 per claim, requiring insureds to fully collateralize the deductible with an approved letter of credit.

Read my full white paper and learn:

  • What Financial Assurance is and Who Needs It
  • What is Changing and Why
  • Which tanks are impacted

While a complete UST replacement is expensive and cumbersome, at some point it becomes unavoidable. These costs, and when they should be incurred, will need to be weighed against growing insurance premiums and retentions.

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P&C Market Update: How TRIPRA Nonrenewal Affects Insurance Programs & Why it’s a Favorable Environment for Buyers

Posted by on December 31, 2014 | Be the First to Comment

 Mkt Update DEC2014 Hero Image

The non-renewal of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) has far-reaching implications, as the federal backstop will be unavailable to traditional insurers as well as to US-based captive insurers. In the latest Market Update, Lockton provides expertise on what this means not only on a broader scale, but how it may affect clients’ insurance programs.

As the issue unfolds, Lockton remains in constant contact with key senior carrier executives and industry associations as it advocates for a retroactive Jan. 1, 2015 reinstatement of TRIPRA when Congress reconvenes.

Concerning the overall commercial insurance market, heading into 2015 it is becoming more competitive. Capacity remains plentiful, although much depends on each client’s individual risk characteristics and loss history.

Market Update Fast Facts_infographic FINAL

As carriers fight to retain renewals and secure new business, the advantage goes to the buyer. Markets are even more willing to negotiate on terms and conditions as an added point of differentiation. With carrier appetites broadening, greater flexibility with terms and conditions, and increased capacity, the market remains highly competitive for the foreseeable future.

Read more about these developments as well as special updates in cyber, healthcare, international, energy, and construction in Lockton’s newest Property & Casualty Update.

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