Category Risk Management

From breeding ground to playground

22 June 2016 Jonathan Faurie
Jonathan Faurie, FAnews Journalist

Jonathan Faurie, FAnews Journalist

When the world woke up on 11 September 2001, it was not prepared for the events that would transpire that day in New York and the effects that it would have not only on America, but on the whole world.

While the world has been dealing with terrorism long before the attacks on the World Trade Centre, the actions of Al Qaeda on that day ushered in a new age of terrorism, an age where it is more of an issue than ever before.

The Insurance Institute of Southern Africa (IISA) recently held a forum on terrorism and political violence where a number of industry professionals gave key insights into the times we are living in.

A fine line between it

While in the past it has been true that we have experienced random acts of terror, we need to understand that quite often, terrorism is motivated by political violence and is an escalation of social unrest motivated by political inefficiencies.

We also need to be aware that a fine line exists between politically motivated violence and acts of terror; and it is a line that is often blurred. This was the message presented by Piers Gregory, Global Product Head: Terrorism and Political Violence at Chubb.

While such violence is always regrettable and is never the answer, Gregory pointed out that if we go back in history, we can see that terrorist groups are fighting for political reformation or emancipation from a system that they feel is inefficient or unjust for a number of years. One person’s terrorist is another person’s freedom fighter.

“The world has changed a lot in 15 years. Pre 9/11, terrorism extensions were included in property policies by insurers, but it was a very small offering which was offered by only five insurers. Post 9/11 the stand alone market has grown to about 50 insurers and continues to attract more capacity. Pre 9/11 a single peril was typically insured for $2 million; this has now increased to approximately $3 billion per peril,” said Gregory.

He added that global risks are increasing, which leads to an increased demand for products that cover these risks.

The local landscape

The US, UK and Australia all recently released terrorism alerts for residents living in and travelling to South Africa. While many people who live in our country feel that this was an unfair stance to take, when we look at the actions that lead to terrorism properly, we see a bit more truth to the warnings than we care to admit.

Recent reports by the Department of Higher Education shows that costs of damage to property at universities nationwide during the Fees Must Fall Campaign had increased by more than R100 million, putting the overall cost since October 2015 at R459 million. More recently, service delivery protests in Vuwani and Hammanskraal turned extremely violent.

Thokozile Ntshiqa, Executive Manager: Stakeholder Management at Sasria, gave insight into how such events escalate into serious acts of violence. “We are seeing a more sophisticated method of organisation when it comes to political violence. Participants are using social media and the internet to mobilise action into areas of importance and to areas where there is a small police presence. Because of South Africa’s connectivity and the strength of our telecommunications infrastructure relative to other African countries, South Africa is being seen as a hotbed for terrorism,” said Ntshiqa.

She further pointed to studies which show that that countries that display poor governance, have cultural tensions and an economy that is under pressure are breeding ground for acts of terrorism/political violence. Does this sound familiar?

Entering the playground

While the rest of the world is struggling with economic growth, developing markets within Africa are forging ahead with infrastructure programmes which will place them in strong positions in the future when the global economic outlook regains traction.

However, it is these projects that are often the targets for terrorists. Maxwell Chiyangwa, Client Executive: Surety & Political Risks Marsh Africa, pointed out that this can potentially have a significant impact on the economies of those countries, and referred to the World Trade Centre example as evidence of this.

“Are we prepared for a major terrorism claim? The cost of the 9/11 incident was staggering. The economic impact on the US was estimated at $123 billion, the incident resulted in the largest property and casualty claim in history ($40 billion), and insurers at the time offered limited and restrictive cover,” he said. He also advised that brokers need to explain to clients that they need to be aware of the products that they have purchased and what they are covered for.

Local threat

While there are certain countries that have to deal with the immediate threat of terrorism on a more frequent basis, it does not mean that every country in the world is completely immune to the threat.

In August 2015, First National Bank (FNB) received a bomb threat at its head offices in the Johannesburg Central Business District which had to be evacuated. The call was made at 4 pm and the building had to be shut down and evacuated at a time when rush hour traffic was starting to build in the area as commutors were making their way home.

Noel Zeeman, part of the Fraud Risk Management team at First Rand group could not discuss the matter in detail as the case is currently in the courts, but he did point out that the suspect was arrested and admitted that he sent through the treat as revenge because he felt that FNB had not treated him fairly in the past and that he felt that staff humiliated him in past interactions.

Editor’s Thoughts:
We need to be aware that there is a fine line between political risk and terrorism, and that countries which have undercurrents of dissatisfaction between the public and government can become hotbeds for such acts. We need to be aware of this not to live in fear, but so that we can work together to try and stop these actions from happening.  Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts

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