Best’s Review published a timely terrorism insurance article written by the talented Iris Lai in its July issue titled, “Continuing Exposure: Sri Lanka bombings call for revisiting terrorism and political risk management, market watchers say.” Below is a summary of the article’s pertinent data points, and takeaways follow.

• The Easter bombings in Sri Lanka have caused businesses in Asia to focus extra attention on terrorism risk management.
• Underwriters are expected to review their exposure to hotels and the risks posed to them by terrorism.
• Regarding Asia, no region is safe from terrorism, even places like Hong Kong and Singapore, said insurance experts.
• Hotels continue to be priority targets of terrorists.
• In Sri Lanka, there has been a surge of demand from uninsured properties to secure terrorism insurance.
• Also in Sri Lanka, the National Insurance Trust Fund is covering $5.8 million in insured damages (actual dollar figure damages are higher) under strike, riot, civil commotion, and terrorism coverage.

There are six takeaways here, including three respectful points of dissent.

First, given that multiple forms of terrorism and insurgency continue to plague Asia, all businesses, and especially hotels, should upgrade security throughout this region. This is especially true for areas impacted by ISIS and like groups.

Second, as underwriters review their exposure to hotels, they should utilize hotel attack data to truly analyze and then assess the risks they face. Doing this can also guide underwriters in deciding:

1. How many more hotels to insure.
2. How much financing is necessary for potential payouts.
3. What probable (and possible) maximum loss events might look like.
4. What named perils should go into policies.
5. What premiums to charge.

Additionally, if hotel risk/insurance managers have this type of risk data, then they can form a captive product and 100% customize their terrorism insurance. This guarantees effective coverage.

Third, hotels have been, and will continue to be, priority targets of Islamist jihadist-driven terrorists. This is a proven pattern and can easily be considered “totality of circumstances” in plaintiff’s lawsuits in cases that include security negligence. As an aside, this is yet another motivation for hotels to adopt data and intelligence to help design modern and sophisticated security in today’s hyper threat environment.

Fourth, the statement by one of the interviewees that terrorists are only going for high casualty rates and not physical destruction should be qualified in insurance policies. Why? While it is true that ISIS’ recent strategy proclamation said attrition (high casualty attacks) was a new goal, attrition should not be the main thrust of hospitality insurance because some of the most physically destructive hotel attacks in the past 10 years have occurred in Asia. Additionally, while several groups in Asia have pledged support to ISIS, not all of them have done so, and the goal of maximum physical destruction of hotels (and other buildings) cannot be ruled out.

Fifth, while the statement by an insurance expert asserting, “About 160 attacks happened at hotels around the world between 1970 and early 2016” can be accurate for a narrow category of attacks, Muir Analytics’ SecureHotel Threat Portal database has 740 incidents of hotel violence for the 2010-end 2016 timeframe. It includes high, medium, low and even no casualty events, and it takes into consideration high order criminal violence, terrorism, political violence, and certain war scenarios. Insurance risk analyses, strategies, and policies need to reflect these statistical realities.

Sixth, based on ISIS’ increased activities in Southeast Asia, the supposition of one of the interviewees that the risk of terrorism in the Philippines, Thailand, and Indonesia is moderate should be revised. Attack statistics, regional government actions and statements, and trend analyses of recent terrorist activities clearly demonstrate that the threat in these countries is high, not moderate. For more details on specific threat indicators, see the video posted by Muir Analytics here: Dr. Jeff Moore: Evolution in Islamic insurgency in Asia.

Hoteliers and insurers can dramatically increase preparedness and decreases risks with data and intelligence. This is the way forward for true hotel risk mitigation, effective insurance, and improved security.

The Sri Lanka attacks were foreseeable and preventable, as demonstrated in the latter part of this video by Muir Analytics at the 57:22 mark: ISIS’ Leaderless Revolution and the Sri Lanka Attacks.

Sources and further reading

“Continuing Exposure: Sri Lanka bombings call for revisiting terrorism and political risk management, market watchers say,” Best’s Review, July 2019.

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