The economic impact of terrorism on the global economy costs tens of billions of dollars. Forbes pegged the impact at $90 billion and rising in November 2016. The Institute of Economics and Peace (IEP) has
identified over 150,000 terrorist events in its Global Terrorism Index (GTI), and
finds that while the number of attacks are dropping in some countries, they
are increasing at alarming numbers in others.
As terror groups like ISIL change their tactics, the number of lone terror
attacks has surged to its highest number ever. According to the IEP GTI,
98 percent of the terror-related deaths in the U.S. since 2008 have been
carried out by individuals acting on their own. Fortunately, there are several
similarities and statistical patterns to individual terrorist attacks, which provide
some insight into creating effective counterterrorism operations.
The financial impact of terrorism primarily affects a country’s gross
domestic product (GDP), which is frequently an indicator to how well a
country is doing (or not). Iraq experiences the highest economic impact from
terrorism, which reached 17 percent of its GDP according to the IEP. Terrorism
affects business operations, tourism, manufacturing and other key industries.
What do insurers need to consider as they determine coverage exposures
and limits for policyholders in this area? There is already existing coverage
for some of the risks such as business interruption, property damage,
workers’ compensation and auto. But as the threat increases, insurers and risk
managers will need to take a closer look at soft targets like hotels, schools,
hospitals, tourist attractions and shopping areas as they consider the liabilities
associated with an attack in these settings.
The financial impact on a mall, amusement park or hotel complex will
extend beyond the time needed to rebuild after an incident. Validating
losses following an attack also takes time and can be an extremely complex
process. Insurers will need to consider how terrorism is changing and work on
developing new products and solutions to expedite claims management.
The America’s Claims Event in Charlotte, N.C., on June 21-22 will examine
a number of issues affecting insurance claims and offer insurers practical
solutions to address many of them. Plan now to attend and network with your
peers and learn what’s on the horizon for the industry.
Patricia L. Harman, Editor-in-Chief