JLT Re VIEWPOINT
Rising to the new terror challenge
JLT Re Viewpoint is JLT Re’s regular series of reports that comment on or give insight into key topics, occurrences or changes in the (re)insurance and broking marketplace. In this report JLT Re has collaborated with JLT Specialty Limited to leverage the experience and specialty expertise of both organisations in this area. At JLT Re, our trusted team combines market leading expertise and proprietary analytical tools with the freedom to challenge conventions. We create new insights and explore innovative capital solutions tailored to meet client needs. JLT Specialty Limited provides insurance broking, risk management and claims consulting services to large and international companies. Our success comes from focusing on sectors where we know we can make the greatest difference – using insight, intelligence and imagination to provide expert advice and robust – often unique – solutions. We build partner teams to work side-by-side with you, our network and the market to deliver responses which are carefully considered from all angles.
Together, we deliver results.
CONTENTS SECTION 1: THE EVOLVING TERRORIST THREAT................4 SECTION 2: REINVENTING TERROR (RE)INSURANCE COVER..........9 SECTION 3: CONCLUSION ........................14
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EXECUTIVE SUMMARY
JLT Re and JLT Specialty (JLT) have long been at the forefront of innovation for complex and evolving risks and are pleased to present this terrorism report as businesses and (re)insurers face new challenges in understanding and addressing the changing terrorism landscape. The global terrorist threat has moved into a new and more complicated phase. Intelligence agencies are tackling risks on more fronts than ever, whether at home, internationally or online. Plots, attacks, malicious cyber events and political instability are becoming increasingly common and these diverse dangers pose serious questions to governments, businesses and risk carriers about how to manage and mitigate new terrorist-related threats. The spread of Islamic extremism, and the rise of the so-called Islamic State (IS) in particular, has led to a growing number of devastating terrorist attacks in recent years. All those executed successfully in Western countries have been focused primarily on crowded spaces in order to cause mass casualties, with capabilities ranging from isolated lone wolf incidents to coordinated and marauding shootings and bombings in urban centres. IS’s potential access to chemical, biological, radiological and nuclear (CBRN) materials in Syria and Iraq remains a concern. Additionally, IS’s exploitation of modern communication forums has become a powerful recruitment tool and the group is also known to be exploring opportunities
to launch cyber attacks on critical national infrastructures in the West. All of this has important implications on the provision of terror (re)insurance cover. Traditional terrorism policies were designed to protect against catastrophic terrorist events where property damage was a major loss component and business interruption was a direct consequence of the physical damage sustained during an attack. This is no longer necessarily the case. Indeed, evidence that insurance is absorbing only a fraction of the economic impacts that have followed recent terrorist attacks indicate that the (re)insurance sector has been slow to respond to evolving risk dynamics and current products are not meeting the needs of corporations. Given the importance of this issue, JLT is working actively with businesses, insurers, reinsurers and global terror pools in order to develop solutions. An optimal outcome would include the creation of new and comprehensive products that account for all potential terror-related impacts across several different coverages. Such solutions will require the support of reinsurers and insurers, along with meaningful input from industry and governments. JLT is uniquely placed to drive this initiative given its peril and market expertise and the collaborative structures within its direct and reinsurance practices. JLT looks forward to working on our clients’ behalf to deliver relevant and affordable products designed to address today’s multifaceted terror environment.
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SECTION 1: THE EVOLVING TERRORIST THREAT Terrorism presents a serious and sustained threat. The scale and scope of terror risk has changed significantly in the fifteen years since the 9/11 attacks by becoming more diverse and dispersed. Most Western nations are today tackling terrorist-related threats on more fronts than ever before as the risk of Islamic extremism emanates from home-grown individuals, international groups and the online environment.
Egypt just days before the Paris attacks further reinforced anxieties.
The rapid rise of IS has heightened concerns. The shootings and bombings in Paris (November 2015) and Brussels (March 2016) demonstrated the group’s intent and capability of orchestrating large-scale terrorist attacks in major Western urban areas. IS’s reported involvement in the downing of a Russian Metrojet passenger plane over
Terrorist-related threats are of course not only confined to the Salafi-Jihadi movement. Risks from long-standing domestic, separatist groups around the world remain. Furthermore, economic crises, military interventions in countries such as Syria and Ukraine and large-scale migration have contributed to a dramatic rise in political instability and civil unrest across several countries. These developments, coupled with numerous allegations of statesponsored cyber attacks, pose important questions about the future of global terrorism and how businesses and (re)insurers should respond to these evolving threats.
Figure 1: Changing Global Terrorist Threat
Predominant threat
People
Principle Targets
Islamic extremism
t rea
ing
g han
th ist r o terr
C Domestic terrorism
Property 2016
1990
Analogue
Digital
Networked
Other groups reduced threat Domestic terrorism: Method of attack: LVBIED Intent: Economic disruption Risk transfer needs: Property damage and business interruption Islamic extremism: Method of attack: PBIED/ VBIED, CBRN, cyber Intent: Mass casualties Risk transfer needs: Property damage, business interruption, non-property damage business interruption, cyber, impacts on people and damage to brand and reputation
Information, Technology and Communication (Source: JLT)
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A CHANGING PERIL Figure 1 on page 4 charts how the global terrorist threat has changed over the last 25 years. Whilst the risk in the 1990s was characterised by groups (typically with domestic agendas) targeting high value properties with large vehicleborne improvised explosive devices (LVBIED) to achieve political ends, terrorist attacks carried out by Islamic extremists have focused primarily on crowded spaces in order to cause mass casualties. Most recent Islamic extremist attacks in the West have been carried out by lone attackers or small cells with unsophisticated capabilities, as demonstrated by the stabbing of Lee Rigby, a British soldier, in London (2013), the Boston Marathon bombings (2014), the hostage attack in Sydney’s financial district (2014), the mass shooting in San Bernardino (2015) and many others. However, as the attacks in Paris and Brussels demonstrated, IS is capable of orchestrating sophisticated operations in Western Europe by dispatching trained fighters to carry out attacks in their home countries. Additionally, the Charlie Hebdo shootings in Paris in early 2015, supported by al-Qaeda in the Arabian Peninsula (AQAP), served as a reminder of al-Qaeda’s intent and capability of launching attacks in the West. Recent activity has also illustrated how extremist groups are successfully exploiting the internet and social media to radicalise new members. The networked nature of modern communications is difficult to disrupt and currently provides extremists with a relatively safe platform to recruit, train, spread their message and coordinate activity. IS in particular has a powerful propaganda machine and is known to be exploring opportunities to launch cyber attacks on critical national infrastructures.
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50,000
16,000
45,000
IS is the first terrorist group to hold significant territory whilst simultaneously fighting two ground wars and economic sanctions. The group remains well-funded, reportedly generating incomes of up to USD 30
35,000
12,000
30,000
10,000
25,000
8,000
20,000
6,000
15,000
4,000
10,000
2,000 0
RISE OF ISLAMIC STATE
5,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Attacks (LHS)
Fatalities (RHS)
(Source: Global Terrorism Database)
60
52.90
Figure 3: Global Economic Costs of Terrorism (2014 USD billion) – 2000 to 2014
50
0
16.96
12.31
12.00
14.74
13.4
15.78
5.42
10
10.99
20
11.07
30
20.44
32.92
40
USD billion
The considerable increase in terroristrelated activity and costs since 2011 has been driven in large part by the rise of IS. The ungoverned regions the group controls in Syria and Iraq has provided fertile ground for foreign fighters’ skills to be honed, ideologies to be further radicalised and weapons to be obtained. The declaration of a caliphate and the allegiance sworn to it by other Islamic extremist organisations around the world has given IS’s broader movement an amorphous quality not anchored by geography. Equally significant is the intention of IS to undertake state activities in the areas it controls, providing a greater degree of permanence as well as revenue generation.
40,000
14,000
7.65
Increased activity in recent years has coincided with a stark spike in economic costs from global terrorism. Indeed, losses from terrorism in 2014 exceeded those incurred in 2001 following the 9/11 attacks, according to the Institute for Economics and Peace (see Figure 3).
18,000
51.51
These dynamics have led to a marked rise in global terrorist activity since 2011 (see Figure 2).
Figure 2: Global Terrorist Attacks and Fatalities – 2000 to 2014
4.93
INCREASED TERRORIST ACTIVITY
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(Source: Institute for Economics and Peace)
million per month (which equates to nearly 10 years’ worth of funding for the core al-Qaeda group). Although IS’s initial aspirations have been to consolidate territorial gains in Syria and
Iraq, this focus is now changing as the group seeks to expand its international reach and establish itself as the leader of the global jihadi movement.
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Figure 4 shows three areas of interest where IS activities may impact people, corporations and (re)insurers in 2016: • Area of interest 1: Despite efforts to end hostilities in Syria, a significant international conflict could still break out in 2016 as external actors remain embroiled in the country’s civil war. Tensions between Russia and Turkey increase the risk of a direct confrontation between NATO countries and Russia should Turkey invoke the treaty’s Article 5, which obliges members to act on Turkey’s behalf. • Area of interest 2: IS will seek to destabilise and create ungoverned spaces in other Middle Eastern and North African nations in 2016. This has already taken place in Libya. Other vulnerable countries in the
region include those that rely on the tourism and oil and gas sectors such as Egypt, Morocco and Tunisia. • Area of interest 3: IS will also continue to target Western regions, which typically have high levels of insurance penetration. The risk to several countries in North America, Western Europe and Australasia in 2016 comes from attacks in crowded places which aim to fuel interfaith tensions. Indeed, IS’s international aspirations are already evident as it has become increasingly involved in orchestrating attacks outside its controlled territories over the last twelve months (see Table 1 on page 8). A number of these attacks were designed to destabilise countries by deterring foreign investment and
tourism, with the aim of precipitating a ‘failed state’ and exacerbating sectarian tensions to draw new supporters to its cause. They were also intended to fuel tensions between Muslims and non-Muslims across the globe whilst stoking fears by demonstrating governments’ inability to protect citizens. Whilst the marauding shootings in Paris represented IS’s first major terrorist attack in the West, they were also a culmination of a strategic progression the group has been looking to achieve since early 2015. Future potential attacks in Europe are likely to be assisted by the estimated 5,000 European Union citizens currently fighting in Syria and Iraq and the opportunities presented by the mass movement of people from both these countries to Europe.
Figure 4: IS's Plan for Global Expansion in 2016
3
3
2
1
3 Areas of interest 1 Syria and Iraq
2 North Africa and Middle East
3 North America, Western Europe and Australasia (Source: JLT)
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NEW REALITY The terrorist threat is therefore likely to remain elevated for the foreseeable future. Indeed, the series of shootings and bombings inspired and orchestrated by IS since early 2015 have seemingly set a pattern for further attacks in 2016 and beyond. This is likely to result in more mass casualty attacks, with capabilities ranging from those akin to Paris and Brussels (i.e. well planned and high profile incidents in urban centres) and less sophisticated attacks (similar to the shootings and bombings in San Bernardino and Istanbul).
(re)insurance sector alike. Attacks carried out by homegrown extremists are harder to anticipate and prevent. The external threat, meanwhile, is rising as the movement of people has become easier and in greater numbers than ever before. Finally, the online environment brings new and relatively unknown risks. Internet forums used increasingly for recruitment purposes have ensured the radicalisation of the next generation has already started. In addition, cyber could be the next terrorist attack vector of choice.
Of course, al-Qaeda and its affiliates continue to harbour ambitions of launching major terrorist attacks around the world. The threat from these groups is no less dangerous today than it was before the rise of IS. In fact, the threat from AQAP in Yemen has grown in recent years as the group has exploited the turmoil in the country.
These evolving dynamics are coalescing to create new terror-related risks such as cyber security liabilities, impacts on people and damage to brand and reputation. The implications of this new terror reality on businesses, governments and other risk-bearing entities are serious, reinforcing the need for mitigation measures that reduce the risk of attack and innovative (re)insurance products that are relevant to clients’ risk transfer needs.
This new, multifaceted terrorist threat poses difficult and complex challenges to the business community and
Table 1: Selection of IS-Related Transnational Attacks – 2015 to 2016 YTD
Date
City/Country
Event
Number of Perpetrators
Fatalities*
Mar-2015
Tunis, Tunisia
Shooting at Bardo National Museum
2
22
May-2015
Karachi, Pakistan
Bus shooting attack
8
46
Jun-2015
Sousse, Tunisia
Mass shooting at Riu Imperial Marhaba Hotel
1
38
Aug-2015
Asir, Saudi Arabia
Mosque bombing
1
15
Oct-2015
Ankara, Turkey
Bombing attack outside railway station
2
102
Oct-2015
Egypt
Metrojet Flight 9268 crash
Unknown
224
Nov-2015
Beirut, Lebanon
Suicide bombings in Burj al-Barajneh
2
43
Nov-2015
Paris, France
Mass shooting and suicide bombings
11
130
Jan-2016
Istanbul, Turkey
Suicide bombing in area popular with tourists
1
12
Jan-2016
Jalalabad, Afghanistan Suicide attack on Pakistani consulate
3
7
Jan-2016
Jakarta, Indonesia
Shooting and suicide bombings
4
4
Mar-2016
Brussels, Belgium
Bombings at airport and metro station
At least 3
At least 31
*Excluding the perpetrators.
(Source: JLT)
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SECTION 2: REINVENTING TERROR (RE)INSURANCE COVER The nature of the terrorist threat has clearly changed but the (re)insurance market has been slow to respond and the financial fallout from several recent attacks has reinforced the need for new products. Although the costs associated with recent terror events are difficult to quantify, some attacks have had considerable economic impacts, affecting the retail and tourism sectors amongst others. Indeed, the Cambridge Centre for Risk Studies has estimated that the economic costs of the marauding attacks in Paris are expected to total between USD 9 billion and USD 12 billion. Insured property losses are nevertheless likely to be minimal. Attacks focused on causing indiscriminate and mass civilian casualties present new challenges to (re)insurers as they herald a new type of risk. Although most existing terrorism policies are designed to respond to events that cause significant property losses, property damage is no longer the primary loss driver. Indeed, the disparity between the hefty
economic impacts of some recent attacks and the decreasing amounts being covered by insurance is a worrying trend, and one which risk carriers must address quickly if they are to remain relevant to clients.
THE OLD PARADIGM Table 2 shows the ten most costly terrorist attacks over the last 25 years in terms of insured losses. It is notable that seven of these events were carried out by domestic groups and individuals that predominantly focused their attacks on symbolic buildings rather than people. For example, the Irish Republican Army (IRA) carried out several LVBIED attacks in the 1990s that resulted in significant insured property losses. Of course, the 9/11 attacks remain the most expensive terrorist-related event where losses were paid out across several traditional lines of business, including property, business interruption, aviation, workers’ compensation (WC), life and liability.
Table 2: Ten Most Costly Terrorist Attacks – 1990 to Q3 2015
Date
Country
Event
Fatalities
Insured Loss (USD million)
Sep-2001
United States
Attacks in New York and Washington DC
2,982
43,500
Apr-1993
United Kingdom
IRA bomb attack in London
1
1,210
Jun-1996
United Kingdom
IRA bomb attack in Manchester
0
1,000
Apr-1992
United Kingdom
IRA bomb attack in London
3
900
Feb-1993
United States
World Trade Center bomb attack
6
840
Jul-2001
Sri Lanka
Tamil Tiger attack at Colombo Airport
20
530
Feb-1996
United Kingdom
IRA bomb attack in London
2
350
Apr-1995
United States
Oklahoma City bomb attack
168
200
Apr-1992
United Kingdom
IRA bomb attack in London
0
130
Nov-2008
India
Marauding attack in Mumbai
113
172
* All losses adjusted to 2015 US dollars.
(Source: Insurance Information Institute, Swiss Re)
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Traditional terrorism policies responded well to these types of events as property damage was a significant loss component and business interruption was a direct consequence of the physical damage sustained during an attack. A number of government-backed terrorism pools have been set up around the world to support insurers in offering this type of cover and prevent the withdrawal of (re)insurance capacity after such attacks. These schemes have served their purpose well, but all currently remain dedicated to protecting against significant or catastrophic terrorist-related financial losses. Some of these schemes also have notable limitations such as requiring official declarations of an act of terrorism to trigger recoveries, restricted cover for certain lines of business (with exclusions for cyber-related acts), limited availability of business interruption and lack of coverage for CBRN risks. The remit and function of global terror pools must therefore be part of the debate. As insurers of last resort, pools may better serve the market by providing backstops for risks that carriers have difficulty modelling or where systemic risks lie, such as CBRN and cyber. Under such an arrangement, the standalone market would be able to focus its attention on providing innovative solutions that offer new and broadened coverage to reflect the prevailing threat that exists today.
MEASURED PROGRESS Progress has been made in some areas as insurers have begun to respond to calls from businesses to provide more clarity and wider terms to existing products, and nonphysical damage business interruption in particular. A number of recent attacks have stressed the need for broadened coverage around business interruption. Through no fault of their own, some organisations have been left to foot business interruption costs at a time of difficulty and financial stress. For example, authorities in Boston initially cordoned off a 15 block area after two bombs exploded near the finish line of the city’s marathon in April 2014. Around 80 hours after the bombings, large parts of Boston were still under lockdown as the manhunt for the perpetrators reached its climax, causing financial damage to a number of businesses. The lockdown of large urban areas during and after recent terrorist attacks has become a familiar and costly characteristic. Whilst most large corporations are capable of absorbing such losses or mitigating the risk through effective business continuity management plans, the impacts on smaller enterprises and those in the hospitality or retail sectors can be, and have been, significant.
l
Figure 5: Terrorism Impacts and Gaps in Existing Insurance Cover
ic
i
Tra d
es
Insurance Cover i t io
n
Property damage
Ter ror
NEW THREAT
ert y
S ome C ybe r
op Pr
Po
al
Damage to brand & reputation
Business interruption
Traditional PA/WC •• Life •• Injury
Cyber impacts Impacts on people
a
ti o
W
C
Tr
di
na
l K &
R
Tr a
n di ti o
al
Traditional Property Terror •• Property damage •• Business interruption •• Non-physical damage BI •• Contingent BI •• CBRN •• Loss of attractiveness
PA
/
Cyber •• Property damage •• Business interruption •• Non-physical damage BI
Traditional K&R •• Kidnap •• Extortion •• Detention •• Hijack •• Hostage crisis •• Response fees •• Additional expenses •• Legal liability •• PA •• Disappearance •• Personal evacuation •• Threat •• Assault •• Cyber extortion •• Cyber BI
(Source: JLT)
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Although standard non-physical damage business interruption cover was initially available through denial of access extensions, this was typically sub-limited and subject to a geographical limit in the order of 250 metres. Recent incidents have shown terrorism scenarios can cause lockdown implications well beyond these 250 metre zones, even in the event of no physical damage. A number of insurers have therefore loosened these restrictions and are now offering wider terms. Reinsurers are also starting to look to support cedents in this endeavour.
THE NEW PARADIGM Nevertheless, the real test (and opportunity) lies in providing comprehensive cover for new terrorist threats. This is not a task without its difficulties, however. As described earlier in the report, the complexity of today’s terrorist threat is multifaceted and brings the risk of attacks from three fronts: at home, internationally and online. This creates a real challenge for the insurance sector which seeks to split different risk components into buckets of pre-existing cover. For terrorism, this includes property, personal accident (PA) and WC, kidnap and ransom (K&R) and cyber (see Figure 5 on page 10). In order to bring clarity to insureds, the optimal solution would be for the standalone market to focus on protecting against a range of impacts that reflect today's terrorism environment (represented by the circles in Figure 5) and create new insurance products that provide comprehensive protection against all risks, including property damage, CBRN, business interruption, impacts on people, non-physical damage business interruption, cyber (including cyber business interruption and cyber extortion) and damage to brand and reputation. Although no such solutions are currently available in the marketplace, JLT is working actively with a number of market participants to deliver innovative products that offer comprehensive cover of this sort to clients. This can be done either through the development of holistic solutions or, more likely in the short term, a suite of products that plug existing gaps.
JLT – DRIVING MARKET INNOVATION Whilst separated appropriately from a governance perspective, JLT has set up a group think-tank made up of terror and market experts across the firm to analyse recent developments around the changing threat and the implications on insurance and reinsurance. The focus of this activity is based primarily on product innovation and how best to meet clients’ needs. JLT believes cyber will be a key feature of terrorism cover going forward. As part of its overall thought leadership strategy on this matter, JLT is able to call on eminent cyber specialists within both our direct and reinsurance divisions to consider what this means for businesses and the future provision of cyber terrorism cover. As a group, JLT has already identified ways of responding to the changing threat and has led market initiatives to deliver innovative products for clients. JLT has a long history of driving market innovation as new and changing risk dynamics emerge. When looking to introduce innovative and complex products into the market, the initiative requires a collaborative approach from multiple constituents, including risk managers, primary insurance carriers, reinsurers, government-backed pools and capital markets. JLT is uniquely positioned to do this for terror coverages given its market leading position in the field and our long-standing and trusted relationships with these market participants. JLT exists to deliver these solutions, and by spearheading efforts to meet today’s challenge of protecting against new and systemic terrorrelated risks, JLT is living up to its long history of pioneering innovation.
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REINSURANCE SUPPORT Despite abundant reinsurance capacity and an apparent desire to create new solutions for uninsured risks, most reinsurers are currently reluctant to support efforts to provide new terror products for some of the more systemic perils highlighted in this report, such as CBRN and cyber. This reluctance stems primarily from the aggregation potential of these risks, more effective deployment of insurer capital and calls from cedents to provide sophisticated ‘crisis management’ products tailored to companies’ specific needs. Whilst capacity and pricing trends for terror reinsurance cover are obviously important, reinsurers’ willingness to consider new approaches in response to the changing terrorism threat will be the decisive factor in determining the availability of coverage. Certainly, increased coordination and collaboration between reinsurers and state pools would help resolve the provision of terror reinsurance, particular with regard to CBRN and cyber. From a CBRN perspective, it seems state pools may offer the best solution in providing risk transfer solutions given the large limits involved. There is also a strong argument for government involvement in providing solutions for systemic cyber losses. Whilst demand for cover from malicious cyber events continues to rise, concern over the lack of vendor modelling products and the risk of aggregation are currently hindering progress in offering reinsurance solutions. Changes to insurers’ capital deployment strategies and the adoption of new underwriting approaches are also providing difficulties for reinsurers. As insurers look to deploy their capital more efficiently and in less conservative ways, they are moving away from the 250 metres, 100% blast zone principle and taking more realistic probable maximum loss (PML) approaches. These same carriers are also seeking to add in other innovative solutions by incorporating traditional crisis management perils or newer products that are designed to cover non-physical damage and lower-level losses. Although reinsurers have yet to provide the innovative and comprehensive cover needed to mitigate the new terrorism landscape, some are attempting to differentiate their offerings by combining coverage across people, property and other perils. The gap between reinsurers that are currently doing this, and those merely focusing on price for traditional products, is likely to continue to grow through 2016 and beyond.
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JLT MODELLING SOLUTIONS Modelling advances will be crucial in delivering innovative terror (re)insurance solutions around some of the new and complex risks highlighted in this report. However, nearly all model developments to date have typically been in reaction to historical events in large metropolitan areas rather than forward-looking assessments of new risks. Indeed, the ‘big three’ model vendors all released their first terrorism models following 9/11. A different approach is therefore needed. Models should consider new attack types and sizes, different terrorist types and groups and have a comprehensive selection of targets. The systemic evolution of the threat should be reflected in changes to these models. JLT has risen to this challenge by building its own cyber and terrorism models. The release of JLT’s first cyber model in the first quarter of 2016 is an exciting development that will support efforts to find clear and comprehensive market solutions around interconnected cyber and terror risks such as malicious attacks and extortion. By responding to a huge surge in client demand, this model represents a significant innovative step that will help deliver wider (re)insurance coverages for cyber-related risks. Sunstone™, JLT’s bespoke terrorism model, is also designed to narrow the gap between the perception of terrorism risk and reality. Sunstone™ uses an unparalleled spectrum of attack types, historical incidents and target data to identify and quantify accumulation, concentration and portfolio risk with unprecedented granularity whist also allowing clients to visualise their exposure. This in turn enables them to identify and secure commercial opportunities. Underwriters can explore new and complex risks and are provided with solutions for scenarios and regions that are not currently covered by existing models elsewhere. The visualisation tools built into Sunstone™ help clients understand where the pressure points might be in their portfolios and where there is scope for writing more business, often in ways that can diversify their exposures. By considering the relationship between 44 different attack types and 42 different target types, Sunstone™ produces
a unique attack type/target type probability matrix that is the basis of the stochastic model. The system’s probability and frequency matrix is populated using a combination of historical research and input from a panel of experts. Probability matrices are run for five geographic territories to reflect the different risks encountered in these regions. Sunstone™ includes exposure modules for property, life and WC portfolios. For life and WC portfolios, Sunstone™ employs a proprietary methodology that reflects exposure at transport hubs, shopping centres and other crowded places, in addition to exposure at home and/or work. The Sunstone™ global target list (which includes more than 1 million structures around the world) is used when producing stochastic analysis but is also available to review in all modules. This ability to visualise the outputs of accumulation or scenario analysis in the same image format as the terrorism target list provides an unprecedented opportunity for clients to consider exposure in the context of potential risks. Sunstone™ delivers real value by setting a new standard in terms of threats considered, geographical scope, supporting target database and lines of business covered. Complementary JLT data capture tools and management information dashboards are also available to help clients monitor data quality, aggregate limit reporting, renewal data and workflow.
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SECTION 3: CONCLUSION Global terrorist-related activity and associated economic costs today stand at record levels and the nature of the threat has evolved beyond the previous capabilities of the (re)insurance sector to address it. Following a series of devastating bombings and shootings around the world in recent months, the likelihood of a major terrorist attack is set to remain high. Whilst the method and location of any more attacks in 2016 will determine the impact on the (re)insurance sector, recent events have highlighted important gaps in coverage and opportunities for carriers to generate new business and premiums. Demand for new terror insurance products clearly exists but is currently undersupplied. Insureds are therefore looking to their insurance partners to plug the gaps in existing policies and to offer comprehensive protection against all relevant threats, including risks to people, damage to brand and reputation and malicious cyber attacks or cyber terrorism. Any long-term solution will realistically require the involvement of global terror pools as well as private risk carriers, with pools potentially taking on more systemic risks and the standalone market providing broadened coverage and new products to reflect the prevailing threat that exists today. Crucially, innovators are needed to devise new solutions which are able to keep pace with an ever changing terrorism threat. JLT is aggressively striving to deliver these solutions by working closely with insurance and reinsurance companies to create innovative products and will continue to lead market initiatives in meeting clients’ terrorism risk transfer needs.
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CONTACTS HEADLINE HEADLINE JLT Re
JLT Specialty Limited
David Flandro Global Head of Analytics +1 212 863 2237 david.flandro@jltre.com
Nick Jay Head of Division Marine, Energy and Political Risk +44 (0)20 7466 1313 nick.jay@jltre.com
Christopher Holt Head of Credit, Political & Security Risk Consulting +44 (0)20 7886 5423 christopher_holt@jltgroup.com
Julian Alovisi Head of Research and Publications +44 (0)20 7558 3376 julian.alovisi@jltre.com
Dennis King Partner +44 (0)20 7466 5227 dennis.king@jltre.com
Raj Rana Head of War & Terrorism Broking +44 (0)20 3059 7054 raj_rana@jltgroup.com
Isabella Gaster Head of Communications and Marketing +44 (0)20 7558 3387 isabella.gaster@jltre.com
James Stephens Partner +44 (0)20 7886 5410 james.stephens@jltre.com
Sarah Stephens Head of Cyber, Technology, and Media E&O +44 (0)20 7558 3548 sarah_stephens@jltgroup.com
Europe • North America • Asia Pacific • Middle East • Africa
www.jltre.com www.jltspecialty.com
This report is published for the benefit of clients and prospective clients of JLT Re and JLT Specialty Limited. It is intended only to highlight general issues relating to the subject matter which may be of interest and does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. If you intend to take any action or make any decision on the basis of the content of this newsletter, you should first seek specific professional advice. JLT Re is a trading name and logo of various JLT reinsurance broking entities and divisions globally and any services provided to clients by JLT Re may be through one or more of JLT’s regulated businesses. JLT Specialty Limited The St Botolph Building 138 Houndsditch London EC3A 7AW www.jltspecialty.com. Lloyd’s Broker. Authorised and regulated by the Financial Conduct Authority. A member of the Jardine Lloyd Thompson Group. Registered Office: The St Botolph Building, 138 Houndsditch, London EC3A 7AW. Registered in England No. 01536540. VAT No. 244 2321 96.
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