Why UAE Needs Political Violence Insurance Against Terrorism

Much like political violence policies, the political risks product suite also responds to risks associated with politically motivated acts, but instead on longer term contracts such as those that hold tooth and claw obligations for defaulted sovereigns, government confiscation, expropriation, or nationalization of a project contract or hostile government action under a trade credit situation. Examples of how a political risk breach could complicate property coverage for that loss could include expropriation of a neighboring property and general loss of attraction, rendering the area unstable.

Again, a shared employee loyalty exclusion and/or war exclusion with the political violence insurances must also be navigated. The general loss of attraction trigger on the underlying property policy (direct physical loss or damage to an adjacent property) is more likely with a political risk breach, particularly when writing coverage for strikes on government-seated properties or mines. This trigger already informs the terrorism tower.

Understanding Political Risk in the UAE Context

Political risk is the nearest and smallest ring of fire that Bob Putnam, our greatest Harvard political scientist, could define. It’s the noncommercial, noncontract, nonfundamental form of violence or threat of violence to a particular firm or individual in a particular place that’s a function of the host country, home country, and/or nonstate agent anywhere in the world. It’s core to geopolitics and hence the Heritage founders created a Center for Geopolitics which is hosting this event with OGEx in a few weeks.

Just as political risk is international before it is home, it’s also local before it is national and global before it is local. Syriana is a kaleidoscope, not a telescope. Born global twenty first century businesses globalize political risk. Almost all of you operate at this nexus. What makes political risk fundamentally unusual as a class of business risk is that the risk may be insured, but the cost to manage it can never be removed.

Only stupid companies “zero-base” their political risk planning, shifting all costs to their international security insurance policies. This is what 9/11 taught us. It’s in my view what Fukushima, the Paris attacks, and Brussels teach us. Stupid firms win Darwin Awards too.

The Evolving Terrorism Threat Landscape

How is terrorism insurance changing and what are you to do if the risk managers say, “Hey team, it’s OK, we don’t need coverage that we’ve had for the past 10 years!” Is it really OK or are the pragmatics of the business brass tacks cutting holes in your safety net? Deep pockets are what they’re for, not catching falling hatchlings. So, what does 2020 hold for war and terrorism? Under the broad category of disaster financing, it’s estimated that only 20% of Covid19 losses worldwide will be covered by insurance.

Why? Terribly simple. Respective insurance language may pose the issue as to whether a pathogen is a trigger, which determines whether business interruption is an event or a loss. Avec love, MERS baby and the others might’ve made a break for Momma Vo’ over the past few years but they’re not giving her the slip this time. See take aways on the Pub claims below that will shape future insurance packages.

Beyond Traditional Property Damage Coverage

OK, so that probably sounds a bit dramatic. But once we get past the broad brush conceptual stuff about insurance, that’s the reality of what may in fact, what must lie beneath for those of us who don’t occupy senior office in the mega corp or government department and isn’t on first name terms with the head of the local insurance office or the leading broker.

If the previous two posts in the series were about coming to terms with just how complex and interlinked our businesses’ supply chains are (and that insurer that I wasn’t going to mention: because we must look at how the placement process itself contributes to the transparency deficit that characterizes our understanding of who is responsible for key supplies to us), this one, through what it tells us about our coverage “conditions precedent“, now raises the stakes.

Political Violence and Terrorism Cover: Key Components

In addition, the Middle East isn’t exactly a hotbed of political stability and government longevity. With a half finished Arab Spring starting to boil over in some of the weaker nations in the region (coupled with neighboring Iraq’s recent meltdown), I continue to be surprised that any Western investments are there at all. In life risk management 101, if you’re going to invest good money in a bad neighborhood, you’d better carry insurance. And again, as we’re finding out in the hot-blooded Middle East and Africa recently, political risk insurance, despite its cost and the heartburn these investments cause,is a wise carrying charge for the global commons.

Why UAE Businesses Cannot Afford Complacency

We’ve done a great job of training end users on what not to click in email, greatly reducing the effectiveness of malware that enters through email. Consequently, attackers are looking for new ways in a new baseline threat landscape where an increasing base level of sophistication among attackers is inevitable. End solving security (essentially the “my security problem is solved, so therefore are all of my problems”) drives attackers to consider the myriad of other ways to get your intellectual property or shut down your business. Why not go after the weakest link and the thing that is of the highest value to your business, your data?

The Financial Impact of Uninsured Political Events

Any form of terrorism is meant to generate fear and uncertainty; prompt individual citizens, organizations, and governments to do things they would not otherwise do; and harm their enemies’ economies, lead to political upheavals, and rock their enemies’ societies to the core. This is not a condition that lends itself to any kind of orderly or organized insurance market. And it is hard to think of a time when it would.

Terrorism insurance has been the topic of countless meetings, and draft upon draft of papers has been drawn up on how one could go about planning for it, but talk about the subject has generally petered out, for all the necessary things to be in place are not anything like what would have to happen. Have the awful events of 11 September changed all that?

Implementing a Robust Political Risk Strategy

Political violence is more complex to define, and to underwrite because of that. It is littered with mines ready to blow up in the face of the unwary, and you could be forgiven for wondering if different names are used just to make sure we’re all kept on our toes. Differences can sometimes be subtle and are not necessarily consistent depending on who you’re dealing with.