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LONDON-British risk managers are facing up to the continued threat of IRA terrorist attacks with increased vigilance, particularly companies with head offices in London.
"Every company which operates in the United Kingdom is aware of the dangers posed by bombs. Business is one of the prime targets for bomb attacks, not only from the IRA but from groups such as animal rights activists and transnational terrorist organizations," according to a brief from Control Risks Group Ltd., a London-based company that offers security and political risk advice to companies throughout the world.
"We have a business community that is incredibly switched on and aware about risk and security," said a spokesman for the City of London Police, the police force responsible for London's financial district.
U.K. risk managers were forced to confront the risks posed by terrorism as a result of two bombs planted by the IRA in London's financial district in 1992 and 1993. These blasts caused more than 1 billion pounds ($1.48 billion) worth of damage between them, prompting claims for more compensation than in the entire IRA campaign in Northern Ireland.
The IRA's attempts to cause massive economic damage on the British mainland also prompted reinsurers to withdraw coverage for terrorism-related damages and led to the establishment of a government-backed industry pool to write commercial terrorism coverage. This forced risk and insurance managers for the first time to separately arrange insurance against terrorism in the United Kingdom.
The lessons learned from these attacks and the heightened awareness of businesses to the risks are obvious, particularly in London.
One of the most noticeable security measures was undertaken by the police, who introduced a traffic management plan to tightly control traffic entering the City of London, London's financial district. Dubbed the Ring of Steel, the plan, introduced in 1993, reduced the number of entry roads 20 to eight from 20, with security cameras located at each of the eight entry points. This plan has recently been extended to entry points farther west.
While recognizing the success of the police efforts, the spokesman for the City of London Police said he is impressed at the way businesses in the City have responded to the threat.
Most noticeable of all is the
contingency planning virtually all companies now have in place, he said.
"There is no doubt that the terrorist incidents have heightened everyone's planning," said the spokesman, whose police force maintains regular contact with businesses in the City.
"Contingency planning is the name of the game," he said, noting that it is vital for companies to be able to continue businesses "as if nothing's happened" in the aftermath of a terrorist incident.
As a result, companies have disaster-recovery plans, which would include contingency arrangements for accommodating staff as well as backup computer systems in other locations. Most buildings in the City also have building managers, who ensure security measures are in place and many of whom have emergency contact facilities with the police.
Another simple but important procedure adopted by many companies following the City blasts is a clear-desk policy, noted the spokesman.
One of the most powerful images people remember following the St. Mary Axe bomb in April 1992 was shattered glass and hundreds of thousands of bits of paper strewn over the City's streets.
"Companies lost a great deal of business and information because of papers blown out of the window," he said.
Companies now require employees to put their paper in the desk drawers at the end of the day, he said.
"Every company should have a disaster plan. Any company could find themselves without a building and a computer system," stressed John Antonini, the Commercial Union P.L.C.'s group risk manager.
Although CU coped remarkably well following the blast, helped by plenty of available office space in recession-hit London, Mr. Antonini, who was not the risk manager at the time of the incident, said he believes that the company still has learned lessons.
As a result of the blast, "we have improved and developed" the contingency plans, and the company now "tests and regularly reviews the plans," he added.
Extra physical precautions, which Mr. Antonini refused to detail, also have been made as a result of lessons learned from the explosion.
Meanwhile, "security all over the country has been improved" at CU offices, he noted.
The company's head office, which stands in the middle of the City opposite the Lloyd's of London building, is recognized as a high-risk location, but extra security measures also have been adopted by the company elsewhere.
However, security not only reflects the risks at different locations but the degree to which it is possible to implement safeguards, he said, noting that the layout of a building and, in particular, its reception area often predetermine the type of security that can be adopted.
Companies often share buildings with other businesses, which makes security more complex.
Peter Greenfield, an insurance executive with pharmaceutical group Glaxo Wellcome P.L.C. agreed that risk managers were often not in a position to fully control security and have to share that duty with building owners.
Glaxo Wellcome's head office currently is in a leased building in central London, so security there is not under the same control as its operational sites outside of London.
Glaxo's Greenford site, which is due to become the corporate head office later this year, has "top-class security" said Mr. Greenfield. Security measures include: fences surrounding the entire site; manned entry gates with entry permissible only with security cards; and close circuit television at appropriate points.
One company that has had to live with the constant threat of IRA attacks in recent years is London Transport, the government-owned company responsible for running London buses and underground trains.
Although risk manager Clive Pracy refused to discuss security measures adopted by the company, he pointed out the importance of being always vigilant and constantly testing emergency procedures.
Chris Brett, a technical director with Willis Corroon London Ltd., has been advising clients not to cancel terrorism insurance coverage and to adopt proactive risk management measures, even during the recent Irish peace process.
Among the tips Mr. Brett offers clients are:
Maintain tight security, check visitors in and out of buildings.
Identify safe, blast proof, areas in buildings if possible, where employees can evacuate in the event of a bomb warning.
Use safety film or blast netting at glass windows.
Properly rehearse evacuation procedures.
Maintain and update disaster-recovery plans.
Although Mr. Brett believes that most large companies have terrorism insurance and contingency plans, "a lot of smaller businesses are not so well prepared," he said.
Following the IRA's bombing of the Arndale Shopping Centre in Manchester in June 1996, a lot of small companies went out of business (BI, June 24, 1996), Mr. Brett pointed out.
Although "awareness related to terrorism is high, commercial pressures often dictate otherwise," preventing companies from taking security measures or purchasing insurance coverage.
But, he warned, "the threat is still there and people shouldn't be complacent."
Moreover, "the Manchester attack demonstrates the IRA's willingness to stage large-scale attacks outside London's financial district," warned Control Risks.
"Other potential targets include shopping and entertainment districts, premises and personnel linked to the British state or to the Conservative party, transport facilities, hotels and lightly protected industrial installations," according to Control Risks.
Control Risks said that despite the bombs of recent years, many U.K. companies do not have any kind of plan in place in the event of a bomb threat.
"Some think that it will never happen to them, some have had so many hoax threats that they have given up taking them seriously, and others simply trust the police to step in and solve everything for them," Control Risks said in a briefing.
"These assumptions are often misguided; no company is immune, and the police have no authority to order the evacuation of private premises," it notes.
Although companies are unlikely to be affected by a bomb, if they are, the damage can be extensive.
"It is therefore essential that a company and each key department has a well-structured plan which is widely understood and properly implemented. Such a plan can not only save time and money-it can also saves lives," Control Risks points out.
And while British risk managers increasingly learn to live with the threat of terrorism, the British insurance market also is adapting to the risks.
Terrorism insurance capacity is increasing in the traditional market just four years after withdrawal of the coverage by reinsurers forced the British government and the insurance industry to set up Pool Reinsurance Co. Ltd. Pool Re, to which most U.K. insurers contribute, is a mutual reinsurer that writes terrorism reinsurance. The U.K. government reinsures the pool.
Although Pool Re still writes most of the commercial terrorism coverage in the United Kingdom, several underwriters in Lloyd's of London's marine market are prepared to write the coverage on a more flexible and, often more cost-effective, basis, brokers point out.
A market facility placed by Marsh & McLennan Cos. Inc. and Willis Corroon Group P.L.C. provides up to 100 million pounds ($158.8 million) capacity for any one loss, according to Julian Taylor, a senior broker with M&M. Companies can obtain up to 300 million pounds ($476.4 million) for any one loss in the open market, he said.
Pool Re meanwhile is expanding its coverage through a new company which has been set up to cover the risk of terrorist attacks on nuclear installations.
Pool Re had excluded nuclear risks from its original coverage because those risks were always written on a separate basis in the market, said Pool Re's chief executive, Leslie Lucas.
The new company, Pool Reinsurance (Nuclear) Ltd., was set up in December 1996