With the deaths of three leading members of the jihadist terror organisation al Qaeda killed within the space of six weeks and the ongoing civil uprising across the Middle East and North Africa, underwriters are facing renewed demand for coverages at a time when the risk environment is ever changing.

The war on terror has taken what many believe has been a significant turn in the past two months with the deaths of three of the most senior members of the al-Qaeda terror group including its figurehead and leader Osama bin laden.

While bin laden’s demise grabbed the global headline this has been quickly followed by the death of Ilyas Kashmiri in Pakistan, and earlier this month Fazul Abdullah Mohammed was killed by Somali armed forces at a check point.

While bin laden was the masterminded behind the 9/11 attacks and was number one on the FBI’s most wanted list, Mohammed was regarded as the most wanted terrorist in Africa.

 

There was a $5 million price on his head for his leadership in the planning of the 1998 attacks on the U.S. embassies in Nairobi, Kenya and Dar es Salaam, Tanzania, and he had been in the run for over a decade.

 

However just with Bin laden and Kashmiri’s deaths the world had been awaiting a response and in the case of Mohammed it was not too long in coming. Two days after he was killed, Somalia's interior minister was assassinated at his home by a female suicide bomber. Al-Shabaab quickly claimed responsibility.

The fear that the deaths would prompt a renewed assault in the West and western interests in the region have grown however one expert says those fears were as yet not grounded in any concrete intelligence.

Anna Murison, Head of Global Jihad Forecasting at Exclusive Analysis the company which provides intelligence information to a range of insurers and brokers across the international markets says the expectation at present was that there would be no significant change in the risk profile for the west.

“In so far as North America and Europe is concerned I do not think that the risk or threat levels will change to any significant degree,” she explains. “We have long been aware that Al-Qaeda has been looking to carry out a major attack on the west and the fact that there has been talk about plans to target the transport and rail systems in the aftermath of the operation is not new. There have been attempts in the past to launch attacks on the United States rail system and we also saw the plot to attack the New York subway system some time ago.”

Ms Murison adds bin Laden would have put a succession plan in place in the event of his capture or death, although that did not preclude an internal power struggle between various leaders, although there was no evidence of one as yet.

“Al-Qaeda operates in a very collaborative way which is very much a core Islamic principle and decision are not left to any one individual there is a great deal of discussion prior to any decisions being taken.”

She says that there was a view that in the Middle East Al-Qaeda has changed its approach as it sought to play a part in the political unrest in the region.

“In the past al-Qaeda would not have considered dealing on any real level with political organisations such as the Muslim Brotherhood as they would not look to play any part in a democratic process but that has changed,” she explains. “The landscape has changed and al-Qaeda will look to raise their profile and play a part in the current political unrest to further its aims.”

Ms Murison says international operations of western firms have been and continue to be a target. Any revenge attack for bin Laden’s death would be more likely to target international firms overseas in regions where there is already an extremist presence, for example in Yemen or Saudi Arabia, or in east African countries like Kenya.

While the threat levels are not seen as significantly enhanced in the insurance markets the question of price and product coverage continues to vex underwriter client and broker alike.

Broker Aon has issued its annual risk map  and say in the current climate political violence, strikes, riots, civil war and war threaten the sustainable growth, continuity and profitability of businesses as much as terrorism.

It has reach such a level that, for the first time in its ten-year history, Aon’s annual Terrorism Threat Map now also takes these factors into account in assessing the severity of threats businesses face around the world.

Unsurprisingly the 2011 map shows increased risk of political violence in the Middle East and North Africa, reflecting the significant turbulence of the Arab Spring uprisings in the region.

The broker said: “The risk of coup d’etat and rebellions in Africa reflect a continent that presents a significant political violence risk. Meanwhile, terrorism continues to severely afflict established conflict zones like Iraq, Afghanistan, Pakistan and Somalia as well as parts of Nigeria and the Sahel region. The threat of occasional acts of international terrorism remains significant for most Western nations and major powers.” 

The map is produced by the broker in collaboration with the security consultancy firm Janusian, which is part of The Risk Advisory Group.

Dr. David Claridge, managing director of Janusian, says:“The threat of terrorism remains a daily concern for business risk managers. Islamist terrorist groups continue to pursue a global agenda, illustrated by plots such as Al-Qaeda in the Arabian Peninsula’s attempt to bomb cargo planes last October last year as well as internationalising local grievances by attacking targets like Moscow’s Domodedovo airport, which was bombed in January.

“The uprisings in the Middle East and North Africa have highlighted the need for risk managers to take a comprehensive approach by assessing exposure to political violence in all its forms.”

Neil Henderson, head of terrorism in Aon Risk Solutions’ Crisis Management team, adds:“While the attacks of September 11 were the genesis for the Aon Terrorism Threat Map, the issues that should be of most concern to people and businesses have evolved greatly in the nearly ten years since. While terrorism remains a very real threat around the world, the reality is that threats to business continuity are also coming from political violence in all its many forms. The change in the way the map is scored should not be seen as a decrease in the incidence or severity of terrorist threats, but rather the fact that it provides businesses with a more inclusive view of some of the risk management issues they are facing around the world.

“As the insurance market for terrorism insurance is very mature and can cope with complex international risks, it should be considered as part of a sound risk management program.”

Rates for terrorism coverage both in the West and in Asia are on the rise. With Pakistan the current focus for the retaliatory attacks by al-Qaeda and its affiliates following bin Laden’s  coverage for the country and neighbour India which has suffered numerous attacks by Islamic terror groups have seen sharp rate increases and there are also areas of Africa including Kenya where terrorism cover costs are rising along with the perceived risk.

However the growing political instability in the Middle East and North Africa which has seen regime change in Egypt all out revolt in Libya and running battles between protestors and security forces in countries such as Bahrain, Syria and Yemen has left insurers facing claims but the cause of the claims is leading to further confusion.

David Austin, Chief Executive of Dubai based MGA Visionary Underwriting Agency, one of just five Lloyd’s coverholders in the Emirate says clients are becoming increasingly confused and concerned.

“The biggest problem at present is that there seems to be a great deal of confusion from clients as to what is and is not covered.

“We have been increasingly seeing claims from policyholders on policies for events which are not covered by the policy against which they are claiming.”

He said the issue remains how the events which have occurred in recent months can be defined.

“The events we have seen could be described as political violence but cannot be seen as terrorism,” says Austin. “The problems started really with the protests in Thailand last year where the government decreed that the violence in Bangkok was terrorism rather then political violence.

“We have clients which have been making claims on their Strike, Riot and Civil commotion coverages but can the events in Libya and Egypt be seen as any of the above.”

He said he has been told of  a claim for over $26 million from a business in Egypt which is now in dispute with the underwriters purely down to the definition of the events leading up to the resignation of the country’s President and the move towards future elections.

“The result has been a demand for an all encompassing political violence coverage which has left the market with a real problem to meet the demand for such a broad level of coverage at a time and in a region where there has been and remains significant unrest.”

Mr Austin adds that prices should be rising but there remain certain markets which are chasing coverage at seemingly any cost.

“Those in the market here are aware of which market is driving the competition,” he said, “Where we were getting 0.3 last year it is now 0.2 or 0.175. What makes the situation worse is that you could in some ways equate a reduction in premium if there was a greater level of risk retention and higher deductable but we are see deductibles which last year were $100,000 now being lowered to £25,000.

“It is unsustainable and we cannot offer pricing to our markets at those levels with the breadth of terms and believe that it is sustainable in any real way.

“I have been writing political risks and terrorism for more years than I care to remember and I have never known a market like it.”