Just two weeks ago, Pool Re hosted the first ever National Terrorism Reinsurance Pools Congress. It drew to London representatives from 13 of the 15 major countries with re-insurance models dedicated to meeting the needs of catastrophe and terrorist insurance. Little did we know then just how tragically prescient our inaugural gathering would be for our colleagues at GAREAT, the French terrorism insurance pool.
Occurring just after the French capital had heightened its security measures ahead of the international UN Conference on Climate Change, the trail of death and destruction left in the wake of seven coordinated terrorist attacks in Paris on the night of 13 November have ramifications for terrorism reinsurance internationally and nationally.
This terrorist outrage reveals two key strategic changes adopted by the organisation calling itself ISIL. First is a move towards the organisation and execution of terrorist attacks on countries of the Western Alliance. Thus far, ISIL’s primary focus has been on territorial conquest and ‘state building’, but the Paris atrocities advance neither agenda. Instead they were clearly intended to inflict the maximum possible death and injury upon civilians outside the territory they control.
A second major strategic shift can be seen in the enlarged range of targets. A new category of target was evident in Paris: small businesses and community venues, family-run restaurants, bars, and cafes. This critical shift makes the urgent job of anticipating future targets significantly more difficult.
The ISIL video released on Monday promising further, similar attacks against western states involved in the battle in Syria underlines the changes of strategy, as does the French authorities’ revelation that further European attacks are planned and pending.
Today’s announcement by the Chancellor recognises a third potential shift in the activities of ISIL – that of a move into cyber terrorism.
The headlines will understandably focus on his doubling of funds set aside to combat cyber attack. But of perhaps of even greater importance in the Chancellor’s announcements today was the simple fact of his placing cyber capability on parity with established aspects of the terrorist armory – guns, bombs and knives.
Including cyber terrorism in this way is for many a long overdue development, and recognises the potential devastating impact of a cyber attack on the physical world as well as the digital one.
Pool Re’s obligations
Pool Re, a mutual reinsurance company established by Parliament in 1993 as a public-private partnership, provides terrorism insurance coverage for commercial property and business interruption. In 2003 its coverage was extended to include incidents of chemical, biological, radiological, and nuclear terrorism risks. Today Pool Re has a buffer of £7.3 billion to pay claims arising from terrorist acts, comprising capital and reserves exceeding £5.5 billion, and commercial retrocession worth £1.8 billion. Losses above that threshold activate an unlimited government guarantee.
Pool Re actively encourages greater solidarity and international collaboration between national terrorism pools, since it is imperative that their leaders stand united and share expertise, particularly during and after an attack. It is what prompted our international Congress.
Pool Re has the legal obligation to facilitate the provision of terrorism insurance in the UK. It has an implied, and I believe even moral, obligation to promote resilient cities. In this regard, particularly given the evolving threat of attacks on small businesses, Pool Re has set about increasing the take-up of terrorism insurance by small businesses owners. To do so, it has introduced premium discounts of up to 40%.
To promote resilience, Pool Re has entered into a partnership with the National Counter Terrorism Security Office (NaCTSO). The partnership, established to incentivise the Property Security Improvement Activity (PSIA) designed by NaCTSO, should improve the resilience of crowded places and key sites of employment and commerce.
PSIA promotes simple, nationally consistent, and proportionate risk management activities designed by counter-terrorism professionals both to minimise the potential for attacks, and to promote security measures. Pool Re offers lower premiums to organisations engaged with PSIA, which in future could be expanded to include a broader range of businesses.
The Prime Minister was right to recognise [yesterday] that the ISIL terrorist threat is an evolving one and that it is probable that cyber mechanisms will be used as part of ISIL’s technological terror capability. The Chancellor was right to make financial provision for the fight against Cyber terrorism [today].
As an organisation Pool Re has a significant potential role in the evaluation of this new terrorism risk. The extent to which the scheme is able to respond in the future to cyber-terror attacks is limited by statute. Pool Re will work with its member insurers to ensure that, as far as possible, the UK approach to the provision of terrorism insurance solutions is both seamless and world leading.
The new terrorism
The Parisian night of terror indicates very clearly that ISIL remains a dominant and existential threat to all democracies. Pool Re will continue to promote resilience and coordination within the UK, and it is also ready to participate in wider global and national planning for the management of terrorist threats. As the risk evolves, Pool Re will continue to invest in initiatives that inform understanding of the threat, and importantly the strategies to minimise it.