War & Terrorism

Spring 2012

The Lockton War and Terrorism division offers dedicated and specialist services encompassing all aspects of War, Terrorism and Political Violence in the London and Worldwide marketplace. Coverage is available for Multi-National Programmes, Single Territory Placements and Single Location Placements as follows:• Sabotage and Terrorism• Riots, Strikes, Civil Commotion and Malicious

Damage• Political Violence (including Coup D’Etat,

Rebellion and War and Civil War)• Terrorism Construction (up to 48 months),

including Delay in Start-Up• Third Party Liability and Employee Liability• Loss of Attraction and Event Cancellation

Political Violence Update

The Political Violence market remains cautious for business in the Middle East with newspaper columns headlined daily with news of Syria as it stands on the brink of civil war. The blame for the bloodshed rests solely on the shoulders of its president Bashar al-Assad, with the death toll now rising to in excess of 7,000 people. It appears that sectarian tensions could flare out of control in a country that up until now has been a model of secular tolerance.

The situation is exacerbated by the fact that Syria sits on the fault line of one of the world’s most volatile regions, with neighbours that include Israel, Iraq and Lebanon, and there is fear among diplomats that civil war could turn rapidly into a proxy war.

According to reports neither Washington, particularly with Obama entrenched in looking towards November and the presidential elections, or London want to get embroiled in committing ground forces. The only real hope currently is that another round of dogged diplomacy can stop the alleged atrocities being carried out by this regime.

The London market continues to see an increase in the number of submissions for business in this country, with few markets looking to commit capacity for full political violence at the moment.

Underwriters who are prepared to ‘take the risk’ do so with high rates and small participations.

The next 6 months will see a certain element of caution for most Political Violence underwriters within the London marketplace. There are still some relatively new capacity providers hungry to entertain this profitable line of insurance which historically has provided unparalleled return for their investors. However, the current over-capacity in the market must be balanced against economic uncertainty in most parts of the financial world, particularly the Middle East.

Leaders of terrorism business do not expect the market to grow this year, and rates for renewal business, given present market conditions and the lack of any major market turning losses, are expected to remain flat.

There are conflicting reports about how much capacity there is available in both the London and worldwide marketplaces for Terrorism/Political Violence, but a rational estimate would put the figure at $2.5bn, with the Lloyd’s and London markets able to commit $1.5bn.

It is important to note here that this capacity could be made available for benign risks, in lightly exposed territories where there is a surfeit of available aggregate, but few clients in these countries would require this amount of cover.

The need for Full Political Violence cover in high risks areas however, has become far more prevalent in recent months, with clients becoming better educated as to the nature of their exposure and risk, and the cover available.

With the problems in Afghanistan, Syria and the Middle East headlined daily in all the major broadsheets, the need for Political Violence Insurance spearheaded by Lloyd’s and London underwriters, will continue to be a much sought after product by clients with exposure in such troubled countries.

The worldwide terrorism threat still prevails and therefore the world as we know it will continue to live in fear of the next major event. Lockton have identified the following reasons for political violence coverage to be considered:

• Terrorism is a manmade risk and as such cannot be predicted

• Affordable now• Bespoke wordings• You don’t have to be the target – proximity of other more

likely targets to Insured premises• Business Interruption as a result of an act of terrorism can

close your business. Lower Manhattan area saw a decrease of nearly 800 businesses in the first two years after 9/11

• Denial of Access coverage available• Flexible limits• Competitive rates and deductibles.

Enhancements Available• Deletion of the Incorrect Declaration Penalty• Debris Removal and Professional Fees (without sublimit)• “Per Occurrence” Limits or Multiple Reinstatements• Contingent Business Interruption: Ingress/Egress; Failure of

Public Utilities; Interdependency Coverage; Customers and Suppliers; Civil /Military Authority

• Increased Cost of Working Sub-limits• By-law extension improved to cover cost of site clearance.

The MarketWe have access to in excess of $2.45billion of coverage for any single risk, with little geographical exclusion. Capacity is sought from Lloyd’s syndicates and company markets based in London, USA, Bermuda, Europe, Scandinavia and the Middle East.

Key Lloyd’s Markets• Hiscox• Catlin• Ascot• Amlin• Talbot• Liberty• Beazley• Chaucer• Pembroke• Brit• Atrium.

Key Company Markets• AXIS• Lancashire• Chartis• Montpelier re• QBE• Inter Hannover• Torus• ACE.

David ChealesHead of War & TerrorismT: 020 7933 2291E: david.cheales@uk.lockton.com

Brendon ScofieldPartnerT: 020 7933 2292E: brendan.scofield@uk.lockton.com

War & TerrorismA division of Lockton Companies LLPAuthorised and regulated by the Financial Services Authority. A Lloyd’s brokerRegistered in England & Wales at The St Botolph Building, 138 Houndsditch, London, EC3A 7AG, Company No. OC353198LLP 557b - Mar 12

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