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As always, in this blog, we focus on discussing risk management and insurance, and this time we explore terrorism and sabotage risks.
As we all know, terrorism and sabotage pose a significant threat to individuals and businesses worldwide. Acts of terrorism and sabotage can cause widespread damage and disruption, resulting in substantial financial losses and even loss of life.
Given the unpredictable nature of these risks, individuals and businesses need to comprehensively understand the risks they face and the insurance options available to them. In this article, we will explore the various types of terrorism and sabotage risks, the costs of these risks, and the insurance options available to mitigate them.
We will also discuss strategies for managing these risks and offer insights into the future of terrorism and sabotage insurance.
THE DEFINITION OF TERRORISM AND SABOTAGE
Terrorism is violence or intimidation in pursuit of political or social objectives. It is often carried out by individuals or groups who seek to destabilize a government or society or to promote a particular cause or ideology. Terrorist acts can include bombings, assassinations, hijackings, and other forms of violence.
Conversely, sabotage involves destroying or obstructing property or equipment, typically for political or economic gain. Individuals or groups can sabotage, taking many forms, including vandalism, arson, or cyber-attacks.
Both terrorism and sabotage can have significant impacts on individuals and businesses. They can cause physical damage, disrupt operations, and result in financial losses. As such, it is essential for individuals and companies to have a comprehensive understanding of these risks and to take appropriate steps to manage them, including considering insurance options.
EXAMPLES OF TERRORISM AND SABOTAGE ACTIONS
The following are Examples of Terrorism and sabotage:
- The 9/11 attacks
On September 11, 2001, terrorists affiliated with al-Qaeda hijacked four commercial airplanes. They crashed them into the Twin Towers of the World Trade Center in New York City and the Pentagon in Washington D.C., killing nearly 3,000 people.
- The London bombings
On July 7, 2005, four terrorists detonated bombs in London’s public transportation system, killing 52 people and injuring hundreds more.
- The Mumbai attacks.
In November 2008, a group of terrorists coordinated attacks across Mumbai, India, targeting hotels, a railway station, and a Jewish center. The attacks killed 166 people and injured more than 300 others.
- 2002 Bali bombings
On October 12, 2002, coordinated bombings targeted nightclubs in Kuta, Bali, killing 202 people, mostly tourists, and injuring hundreds more. Jemaah Islamiyah, a Southeast Asian extremist group with links to al-Qaeda, carried out the attack.
- 2009 Jakarta bombing
On July 17, 2009, two suicide bombers targeted two luxury hotels in Jakarta, killing seven people and injuring more than 50 others. The attack was carried out by the terrorist group Jemaah Islamiyah.
- 2018 Surabaya bombings
On May 13, 2018, a family of suicide bombers attacked three churches in Surabaya, killing 13 people and injuring more than 40 others. The attack was carried out by an Indonesian extremist group affiliated with ISIS.
Examples of Sabotage:
- Stuxnet malware attack
In 2010, a sophisticated computer worm known as Stuxnet was discovered to have been used to sabotage Iran’s nuclear program. The malware was designed to damage industrial control systems and specifically targeted centrifuges used in uranium enrichment.
- Eco-terrorism
Some environmental activists have engaged in acts of sabotage against companies and organizations they view as environmentally destructive. For example, in 1998, a group of activists burned down a ski resort in Vail, Colorado, causing millions of dollars in damages.
- 2019 Saudi oil attacks
In September 2019, a drone attack on two major oil facilities in Saudi Arabia caused significant damage and disrupted global oil supplies. The attack was attributed to Iran, although Yemeni Houthi rebels backed by Iran carried it out.
- Arson attacks on palm oil plantations
In recent years, several arson attacks have occurred on palm oil plantations in Indonesia, the world’s largest palm oil producer. Some of these attacks have been carried out by environmental activists who oppose the expansion of palm oil plantations.
- Cyber-attacks on government websites
In 2019, several Indonesian government websites were targeted by hackers who defaced the sites with messages supporting the West Papua independence movement.
- Train derailment
In 2018, a train carrying fuel derailed in Temanggung, Central Java, causing a large fire and injuring several people. The incident was later found to have been caused by sabotage, although the perpetrators were never identified.
UNDERSTANDING THE TERRORISM AND SABOTAGE INSURANCE
Terrorism and sabotage insurance coverage is designed to protect individuals and businesses against losses resulting from acts of terrorism and sabotage. This type of insurance can be purchased as an add-on to existing property and casualty insurance policies, such as commercial or business interruption insurance.
Terrorism insurance typically covers physical damage to property and loss of income resulting from a terrorist attack. This coverage may also extend to losses resulting from threats of terrorism or the discovery of a terrorist plot, even if an attack does not occur.
On the other hand, Sabotage insurance typically provides coverage for physical damage to property resulting from sabotage and loss of income resulting from the interruption of business operations.
It is important to note that terrorism and sabotage insurance coverage vary widely depending on the policy and insurance company. Some policies may exclude coverage for certain types of terrorism or sabotage, such as those perpetrated by certain groups or in specific geographic locations. Additionally, coverage limits and deductibles may also vary.
Individuals and businesses interested in purchasing terrorism or sabotage insurance coverage should consult an insurance professional to understand their needs and determine the most appropriate coverage options.
It is also important to note that terrorism and sabotage insurance coverage is just one aspect of a comprehensive risk management strategy. Businesses and individuals should take additional steps to prepare for and mitigate the risks associated with terrorism and sabotage, such as implementing security measures and emergency response plans.
WHAT ARE THE MAIN UNDERWRITING FACTORS FOR TERRORISM AND SABOTAGE INSURANCE?
The underwriting factors of terrorism insurance are the various factors that insurance companies consider when determining whether to provide coverage for acts of terrorism. These factors can include:
- Location
The location of the insured property is a significant underwriting factor for terrorism insurance. Some areas may be more prone to terrorist activity than others, and insurance companies may charge higher premiums or offer lower coverage limits for properties located in high-risk areas.
- Type of property
The type of property being insured can also be a factor in underwriting terrorism insurance. Properties that are high-risk targets for terrorist attacks, such as government buildings or high-profile landmarks, may be more difficult to insure or may require higher premiums.
- Security measures
The security measures at the insured property can also be a factor in underwriting terrorism insurance. Properties with robust security measures, such as surveillance cameras, security personnel, or other actions that reduce the risk of a successful terrorist attack, may be more attractive to insurance companies.
- Terrorism risk assessment
Insurance companies may also conduct a terrorism risk assessment to determine the level of risk associated with insuring a particular property. This assessment may consider factors such as the region’s political stability, the history of terrorism in the area, and the potential targets for terrorist attacks.
- Coverage limits and deductibles
The amount of coverage requested and the deductible can also be factored into underwriting terrorism insurance. Higher coverage limits and lower deductibles may be more expensive but can provide more comprehensive protection in a terrorist attack.
CAN TERRORISM RISK BE COVERED UNDER THE STANDARD INSURANCE POLICIES?
The coverage of terrorism risk under standard insurance policies can vary depending on the policy and the insurance company. In some cases, terrorism risk may be covered or extended under specific policies, while in others, it may be excluded.
For example, some commercial property insurance policies may include coverage for terrorism risk as a standard part of the policy. In other cases, insurance companies may offer an endorsement or add-on to a commercial property policy specifically for terrorism coverage.
However, it is essential to note that terrorism risk is often excluded under standard commercial insurance policies, such as general liability or workers’ compensation insurance. In these cases, businesses may need to purchase a separate terrorism insurance policy or endorsement to ensure they are fully protected against terrorism.
Individuals may also have limited coverage for terrorism under their personal insurance policies, such as homeowners or renters insurance. However, this coverage is typically limited to physical damage to the insured property and may not cover other losses, such as loss of income or business interruption.
WHY DO COMPANIES NEED AN INSURANCE BROKER TO ARRANGE TERRORISM AND SABOTAGE INSURANCE?
Companies may need the service of an insurance broker for terrorism insurance coverage for several reasons:
- Expertise
Insurance brokers are experts in the insurance industry and can provide valuable advice and guidance to help companies navigate the complex world of terrorism insurance. Brokers can help companies understand their specific risks and insurance needs, the available coverage options, and the benefits and drawbacks of each option.
- Access to multiple insurance companies
Insurance brokers work with multiple insurance companies and can provide companies with access to a broader range of coverage options than they might be able to find on their own. This can help companies find the most comprehensive coverage at the most competitive price.
- Negotiation
Insurance brokers can negotiate with insurance companies on their client’s behalf to ensure they get the best possible coverage at the best price. This can involve negotiating coverage limits, deductibles, premiums, and other terms and conditions of the policy.
- Claims assistance
In the event of a terrorist attack or other covered occurrence, insurance brokers can assist companies with the claims process and ensure that they receive the full benefits of their policy.
This can include providing guidance on filing a claim, working with the insurance company to ensure that the claim is processed quickly and efficiently, and advocating on behalf of the company if there are any disputes or issues with the claim.
The service of an insurance broker can be invaluable for companies seeking terrorism insurance coverage. Brokers can provide the expertise, access to multiple insurance companies, negotiation skills, and claims assistance that companies need to ensure that they are fully protected against the risks of terrorism.
One of Indonesia’s leading insurance broker companies that focuses on providing terrorism insurance is L&G Insurance Broker.
For all your insurance needs, contact L&G now!
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