International risks and local worries

If we turn on our televisions and tune into the BBC or CNN, we are likely to see news about an event or a natural disaster which resulted in loss of life and damage to property.

Risk management has always been an important part of the insurance industry, however, we can at times become complacent when it comes to this. Two key incidents in the UK highlighted the need to become more risk focused.

A towering inferno

One of the most recent events that received massive public attention was the Grenfell Tower Fire which affected a block of public housing just outside of London.

Speaking at the recent Norton Rose Fulbright Insurance Seminar, Tim Ingham – Consultant Norton Rose Fulbright London – said that the London insurance industry learned a lot, and is still learning a lot, from the incident.

In summary, a fire started on the fourth floor of the residential tower in the early hours of the morning on 14 June. By 5:16 am, the whole building was aflame and emergency services were working hard to resolve the situation. Eighty people died in the fire and lot more were evacuated during the event.

The north worries  

As with most cases such as the Grenfell Tower Fire, there is an ongoing inquest as to what started the fire. This, as well as the identification of bodies, is expected to last until the end of the year.

Ingham pointed out that the tower was insured by a Norwegian insurer who not only had to deal with immediate losses, but who will have to deal with losses until the inquest has been finalised. “There are massive implications that insurers will have to worry about. Not only will the insurer have to deal with the losses to the building structure, but also to losses caused by adjacent third-party properties. One suspects that the civil claims relating to the fire will trickle in as families get to back to their daily lives or when the investigation process has been concluded,” said Ingham.

However, the majority of this may not fall squarely on the shoulders of insurers as the inquest to determine how the fire started will affect liability claims and where responsibility will ultimately lie.

Eyes wide shut

The source of the Grenfell Tower Fire is suspected to be the cladding around an apartment on the fourth floor of the tower. “It turns out that the reason that the fire may have spread so rapidly is that the cladding was not up to safety codes. After the Grenfell fire, it was reported that the cladding in over 220 other buildings in London do not meet safety requirements,” said Ingham.

This is a major problem for insurers. It also raises serious concerns surrounding risk management. Yes, insurers take on a risk in good faith, but in a major case such as the Grenfell Tower, should the insurer not physically be reassessing the risk on a regular basis?

Terror in the streets

Possibly one of the major issues that we see media companies cover is terrorist attacks. The US and the UK, as well as other major European cities, have seen their fair share of terrorist incidents over the past two years.

Again, the effects of these attacks are far more extensive than the coverage given by media organisations.

A no-go area

A new tactic employed by terrorists is to target individuals without damaging property. This was the case in the London Bridge Attack on 3 June where a van left the road and struck several pedestrians on London Bridge. After the van crashed, its three occupants ran to the nearby Borough Market area and began stabbing people in and around restaurants and bars.

“Following the incident, the Borough Market was closed for a week which led to massive loss of revenue. There was no property damage, so most traders were uninsured. There is a significant reduction in tourism due to terror. We have seen this in Paris, London and Barcelona. There is an impact on businesses as an indirect loss because there was no physical damage to their businesses, and they weren’t personally targeted, yet they are affected. It is undeniable,” said Ingham.  

African soil

The above incidents are prime examples of how risk management needs to take centre stage.

As is the case in the UK, South Africa’s infrastructure is now failing and taking strain. Being proactive when it comes to risk management may minimise the effects of business interruption and in some cases, eradicate it completely. Perhaps it is time that we become more forward looking when it comes to risk?

Editor’s Thoughts;
There are currently discussions in London to change policy wording to adapt to these new risks. Should South African insurers be taking a similar approach? The bottom line is that we are not immune to these risks.  Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.