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Insurers react to changing terror threat

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The recent surge in terrorist attacks in Europe and North America seeking to inflict mass casualties rather than property damage has led to a nascent market for active assailant coverage, bringing with it a host of advisory and consulting services to help commercial policyholders address the threat.

Policies providing protection against exposures such as bodily injury, business interruption and property damage are taking hold in the market, with ancillary services aimed at reducing the risk of attacks and responding to the events when they take place.

Insurers offering the coverage take differing approaches, but each partners with an external firm to offer some level of related added service, such as post-incident communications, counseling services, crisis management and training.

“Training your employees to be aware and prepared can reduce the risk of an incident occurring,” said Regan J. Rychetsky, Austin, Texasbased loss control manager for York Pooling, a unit of York Risk Services Group Inc., and formerly the director of HHS enterprise risk management and safety for the Texas Health and Human Services System.

“I think training is absolutely critical,” said Cindy Stevenson, superintendent of the Boulder Valley School System who previously served as the Jefferson County, Colorado, superintendent for 12 years, retiring in 2014.

Ms. Stevenson was deputy superintendent in Jefferson County at the time when a mass shooting event occurred at Columbine High School in the Jefferson County Public Schools on April 20, 1999. The state of Colorado subsequently mandated that every school have a safety plan.

“Businesses may or may not have the expertise to deal with crisis response and business continuity plans,” said James Dover, New York-based senior vice president for war and sabotage at Ironshore Inc., a Liberty Mutual Insurance Co. unit.

“We need to be out of the gate as soon as our insured calls. We feel that having a plan and having someone to help you execute that plan is vital. It goes hand in hand with having indemnification.”

Rising toll

Recent mass casualty events — such as when a van plowed into a crowd in Barcelona killing 13 and injuring more than 130 last month; bomb, knife and van attacks in London and Manchester, England, earlier this year; the July 2016 truck attack in Nice, France, which killed 86 and injured 458; shootings in San Bernardino, California, in December 2015, and at the Pulse Nightclub in Orlando, Florida, in June 2016 — have brought the issue to the forefront and caught the attention of insurers, policyholders and others in related fields.

“We’d identified these types of event were starting to happen, smaller events in which there was a greater focus on human impact and psychological impact,” said Ben Tucker, New York-based head of U.S. terrorism and political violence insurance for XL Group P.L.C., which does business as XL Catlin, adding that such events carried with them the potential for lost income due to business interruption and reputational damage.

“We had a couple of events which resonated with us,” Mr. Dover said, citing specifically the San Bernardino and Pulse Nightclub shootings.

“The mass casualty events are the ones everyone is looking at,” said Wendy Peters, executive vice president of financial solutions-terrorism and political violence for Willis Towers Watson P.L.C. 
in New York, adding that the brokerage is “actively binding” policies but has yet to see any claims.

Coverages differ

Insurers seeking to meet the rising chorus of questions from policyholders have taken different approaches to the market.

Beazley P.L.C. launched its product in February 2016, writing business via a consortium with other Lloyd’s of London syndicates, said Chris Parker, political violence kidnap and ransom underwriter, political accident and contingency, at Beazley in London (see related story).

Beazley uses a ratings model that incorporates variables such as location, crime rates, number of shootings, types of educational institutions, and even student-to-teacher ratios, said Mr. Parker, and the insurer uses a broad definition of weapons in its policy wording that ranges far beyond firearms.

The coverage includes a response element, which is a major draw for potential policyholders.

“That’s why we decided this was going to be an integral part of our offering,” said Mr. Parker. “A lot of people welcome the independent company coming in to give them advice,” he said, adding that some clients ask about the response element independently of the coverage.

Beazley’s response partner, Roswell, Georgia-based Firestorm Solution L.L.C., provides clients with risk mitigation consultancy as well as incident response.

“They’ve got the bandwidth to deal with a big crisis,” Mr. Parker said. “They’re very good at putting an action plan in place to make the risk better. And if an event occurs, clients have a telephone number they can call on the policy.”

XL Catlin launched its Active Shooter coverage in February 2016, the result of two years’ development, said Ben Tucker, head of U.S. terrorism and political violence insurance for XL Catlin in New York.

Available worldwide, limits are up to $35 million per risk, Mr. Tucker said. Originally developed for three clients — it’s first policyholder was a financial services firm — bindings have increased, with XL Catlin U.S. writing some 20 contracts in 2016 and 45 to date in 2017, Mr. Tucker said, and submissions up about 100% over a year ago.

Again, risk consulting and mitigation services are an important element of the coverage.

“Clients were not just interested in buying insurance for this,” Mr. Tucker said. “They themselves recognize there is a need for preincident consulting to prepare them for these types of events.”

XL Catlin engaged S-RM Intelligence and Risk Consulting Ltd. in London, which also has offices in New York and elsewhere.

Such support includes an active assailant workshop, according to Christopher White, director of security services within S-RM’s risk management business unit in London. The firm also offers two online training tools, one aimed at upper management and the other at general employees, and a physical location security assessment can be provided, he said.

Hiscox Ltd. launched its active shooter coverage in October 2016, and it has been updated since “to respond to what has happened in the world since last year, in particular, the two vehicle attacks on pedestrians in London and the knife attack on London Bridge,” said Jennifer Rubin, vice president for war, terrorism and political violence for Hiscox in New York.

“Brokers and insureds have come back asking if those types of events could be included in an active shooter product, so we have now broadened our definition of an attack to include knives and vehicles in addition to guns,” said Ms. Rubin.

The move to broaden the definition was finalized in August. Coverage include business interruption in addition to property.

“This is a first-party financial indemnity product, so we aren’t going down the road of insuring any liability,” Ms. Rubin said.

“What we have decided to do is provide the business interruption coverage based on the time the business is out due to an attack. Our policy would respond to the lost income and of course any property damage.”

Pricing varies widely based on risk exposure.

“The pricing will be indicative of an insured’s exposure,” Ms. Rubin said. “A relatively small business with a small annual revenue number is likely to pay a minimum premium of $2,500 per $1 million of limit, and then it goes up from there based on the revenue that they are generating.”

“We have seen some very large hospital systems in the Southeast with a good revenue stream from elective surgery interested in coverage, and those are the folks wanting to buy limits in excess of $10 million. And depending on what their annual revenue looks like, premium could be $50,000 or more,” Ms. Rubin said.

Added services

Hiscox has partnered with public relations firm Weber Shandwick Inc. in New York for post-incident support and response, with the company on retainer.

Weber Shandwick “will work directly with insureds, to hold their hand postevent and help them get through media relations, employee communications, setting up services such as counseling for employees, even arranging added security for a physical site,” Ms. Rubin said.

As with other such products, the support services have generated strong interest among clients.

“It’s a huge draw,” Ms. Rubin said of the post-incident support, “especially for insureds which don’t already have a company on retainer to help them with this.” “The immediate response services … include media consulting, post event counseling services — that all comes with the program,” said Ms. Peters of Willis Towers Watson.

Ironshore handles active shooter coverage as an add-on to it stand alone terrorism coverage, said Mr. Dover of Ironshore.

“We typically add it on with additional premium and sublimits within the overall terrorism policy,” he said.

Ironshore’s active shooter coverage was launched in September 2016 along with its crisis management response service, which is provided to all stand-alone terrorism policyholders, regardless of whether they purchase the active shooter coverage.

Ironshore’s crisis management partner is proprietary, Mr. Dover said.

Combining the response and consulting services into their programs has helped insurers appeal to potential policyholders, sources said.

“There were no products out there that were actually addressing the crisis management aspect of this, so, it was good for us to actually have the opportunity to offer those consolidated services into a single program, the risk transfer as well as the crisis management services,” Ms. Peters said. “I think a lot of companies value the idea of having that panic button to push in the event of an emergency. Obviously, that’s a very important part of their program.”

The inspections and security input provided by some of the insurers’ partners also can be an important preventive tool.

“Many acts could be reduced or outright avoided by recognizing behavior in the workplace or operational surveillance ahead of time,” said Nicholas Smith, practice leader of security risk consulting at Willis Towers Watson in New York.

“I know a lot of people in risk management are looking for that preventive physical security solution, and training for what to do in an emergency, and those are helpful, but prevention is just as important,” said Scott Murphy, retired superintendent of the Littleton Public School District in Colorado, who was in that position during a shooting incident at Arapahoe High School in December 2013.

“It’s a balance between the two,” Mr. Murphy added.