Tag Archives : Terrorism

FERMA statement on today’s terrorist attacks in Brussels

The Federation of European Risk Management Associations (FERMA) and Belgian risk management association BELRIM thank their many friends and colleagues who have sent messages of concern today after the terrorist attacks in Brussels.

We in turn send our condolences to the families and friends of those who have been killed and injured.

We have no doubt that these attacks, coming as they do after those in Paris in 2015, focus attention on the importance of managing this risk in our organisations and in society as a whole.

Expert Views: the changing aspects of managing terrorism risk

Terrorism has been a threat for some years and materialised sadly in France several times in 2015. We are facing a situation where victims of an attack in France (whatever their nationality) will be indemnified by state funds, either existing or through free access to medical services which was recently decided.

Anne-Marie Fournier, board member of AMRAE and Risk Manager of luxury brands group, KERING

Anne-Marie Fournier, board member of AMRAE and Risk Manager of luxury brands group, KERING

Employers have to take decisions on the protection of employees and security departments in industrial or commercial services companies decide on most appropriate measures depending on location, activity, reputation, etc. Most industries are checking more carefully all persons entering their locations and probably also checking many sensitive areas like for example crucial data of the company.

Regarding property damage and consequential business interruption (PD/BI), insurers underwriting PD/BI covers have an obligation to provide terrorism cover. As a counterpart of this mandatory cover, insurers access a global reinsurance scheme administered by GAREAT, a pool launched on 1 January 2002. GAREAT organises the tariff and reinsurance of this exposure with the commercial insurance market and through French state funds for “unlimited treaties” reinsured through the Caisse Centrale de Réassurance.

Unfortunately GAREAT has no dedicated reserves, as all premiums are transferred to the market reinsuring the terrorism exposures. As a consequence, there is a limited possibility of action in order to answer current needs for cover for “financial losses” without property damage. For example, activities that closed by prudence in the days following the recent attacks cannot benefit from business interruption cover if they have not suffered any property damage.

There are many activities with large numbers of visitors or participants which have cancelled activities and closed locations by prudence and have no insurance for these financial losses.

AMRAE would encourage this system to be reconsidered in order to leave the commercial market free to deliver the cover that it does elsewhere. There is hardly any other mandatory state schemes for terrorism insurance in the world; (many are optional.) The state-backed scheme could then concentrate on losses which cannot be obtained from commercial markets: nuclear, biological and chemical (NBC), pure financial losses, unlimited cover over €2B, etc.

Additional resources:
AMRAE resilience attentats (French)

Knowledge Corner

FERMA’s selection of recently published useful reports for risk managers. Continue reading

Terrorism in Paris and elsewhere

The horrific terrorism attacks in Paris during the week of January 5th are a clear reminder to risk managers of the growth in risks which are intangible and hard to manage, according to FERMA President Julia Graham. Others that have come onto the scene in the last year are the conflict and sanctions related to Russia and the Ukraine, and the Ebola outbreak in West Africa. Continue reading

Expert Views : US terrorism insurance – the new TRIA


Nathan Bacchus

As any business or organisation with assets in the United States knows, 2014 and the first few days of 2015 were a period of extreme uncertainty related to the future of the US Terrorism Risk Insurance Act, or TRIA.

This programme, created in the aftermath of the 9/11 attacks, established a mechanism for a public-private share of terrorism insurance losses. It has proved critical to ensuring that commercial consumers of insurance, with assets in the United States, are able to obtain adequate terrorism coverage at affordable prices.

Before the 9/11 attacks, losses from terrorist events were typically included in general insurance policies. The risk was considered negligible and, therefore, did not come with a specific cost to the insured; however, this all changed following 9/11. Insurers re-assessed the risk of terrorism and concluded that such coverage would be excluded from general insurance policies in future. Terrorism coverage became available only through specialised policies that came at a very high, and often unaffordable, cost to insureds. This lack of coverage posed a very real threat to the US and global economies, as many real estate and development projects were postponed or canceled due to problems securing loans without adequate terrorism coverage.

The TRIA response
The TRIA programme, established in 2002, was meant to address this issue in several ways. First, it created a public-private cost sharing mechanism for acts of terrorism. The programme established a $100 million “trigger” that had to be reached before the programme would be set into motion. This first $100 million in losses was to be covered solely by the private industry. Once the trigger was reached, the private industry would have a further 20% deductible. After that deductible was met, the US government would then pay 85% of losses while the private industry would pay 15%.

Another critical component of the TRIA programme is its requirement that insurers offer terrorism coverage that does not differ materially from non-terrorism related coverage. This ensured that insureds could find adequate coverage at affordable prices. The third major component of the TRIA programme is meant to protect the American taxpayer by the creation of a recoupment mechanism for the private industry to repay, over time, any TRIA losses paid by the government.

Since its creation, TRIA has proved to be an unequivocal success. Coverage is widely available for nearly any organisation doing business within the United States. This is critical as nearly all lenders require proof of terrorism coverage before entering into any lending agreement. Additionally, rates have gone down significantly since the days immediately following 9/11 and have stabilised at levels that are affordable for the vast majority of insureds. This is true even in the most high-risk areas, such as New York City or Los Angeles.

The most recent six-year extension of TRIA, signed by President Obama on 12 January 2015 does make a few changes to the programme. The trigger will increase from $100 million to $200 million by 2020. The US government’s share of losses will decrease from 85% to 80%, and the amount the government will recoup from the industry in the event of a government payout will increase from $27.5 billion to $37.5 billion. These changes were largely expected and are unlikely to cause significant increases in terrorism insurance rates or decrease in overall capacity.

If your organisation has assets within the United States, it is important to discuss with your broker and/or insurer any potential impacts the changes to the TRIA programme could have on your coverage. If you have any questions about the programme itself, please feel free to contact me directly at nbacchus@rims.org.

Nathan Bacchus is Senior Government Affairs Manager at
RIMS, the US-based risk management society.

Edwin Meyer

Edwin Meyer

FERMA Secretary General Edwin V Meyer, General Manager Risk and Insurance for Arcelormittal based in Luxembourg, commented:
“As an insurance risk manager for a company having significant assets in the United States, we have followed the pending renewal of TRIA with great interest. The ability to provide broad and affordable coverage against a disastrous terrorism event is crucial and given today’s environment, this must be a shared responsibility involving companies and the government. It is not one that insurers and insureds can bear alone.

With an ever increasing geopolitical risk landscape and rise in terrorism, the United States Congress decision to extend TRIA for a period of six years, will be viewed favourably by the governments of other countries to continue supporting similar arrangements.”

Terrorist attacks in Paris

FERMA wishes to join its member AMRAE in expressing solidarity and condolences with the victims of the terrorist attack in Paris on the magazine Charlie Hebdo and others. Continue reading

Knowledge Corner

FERMA’s selection of recently published useful reports for risk managers. Continue reading