Coverage Against International Conflicts and Terrorism

International conflicts are heating up – and businesses may get caught in the crossfire. With the risks of wars and terrorism increasing, brokers should protect their clients by recommending insurance products.

Global Conflicts Are on the Rise

In 2023, the United Nations stated that the world was experiencing the highest number of global conflicts since the Second World War. According to Crisis Group, the top 10 global conflicts to watch in 2024 include the ongoing Israeli-Palestinian conflict in Gaza, the potential for wider war in the Middle East, and the continuing Russia-Ukraine war.

These conflicts impact international business in numerous ways – the recent attacks in the Red Sea are a dire reminder of this. According to the BBC, the Houthis are an Iranian-backed rebel group that views Israel as an enemy. They’ve been attacking ships they claim are Israeli owned, flagged, or operated or headed to Israeli ports. The Guardian says Houthi rebels claim they have successfully targeted both a British and a U.S. ship. Reuters says a recent attack also targeted a Greek-owned cargo ship carrying corn from Brazil and bound for Iran.

AP News says some shipping container companies are avoiding the Red Sea by sending ships around Africa and the Cape of Good Hope, but this may add a week or two to the transit time while increasing costs for fuel and other expenses. The attacks and subsequent delays contributed to a 1.3% decline in world trade in December.

Kidnap and Ransom Risks Are Also Increasing

When leaders travel internationally, it exposes businesses to kidnapping and ransom risks. For example, Sky News says Colin Armstrong, a British businessman, was recently kidnapped while in Ecuador at a ranch he owns. His partner was also kidnapped. Control Risks warns that global kidnapping rates have been increasing since 2019, a trend that is expected to continue. The average ransom demand has also increased – from $259,913 in 2019 to $368,901 in 2021, an increase of 42%.

According to Canadian Lawyer, the regions with the highest kidnap and ransom risks are Mexico, Venezuela, Brazil, Nigeria, India, Haiti, Colombia, the Philippines, Gulf and Aden/Indian Ocean/Gulf of Benin, and Pakistan. However, kidnapping can occur anywhere. Deccan Herald says a businessman was kidnapped in the West Midlands region of England in 2023 and was only released after the kidnappers’ ransom demand was met.

Terrorism and Riots Increase Exposures

Riots, protests that turn violent, and terrorist attacks threaten businesses by causing property damage or restricting access to locations. Cyber terrorism is also a significant threat.

Ongoing international conflict and the tensions created by these conflicts mean some areas may have an increased risk of terrorism. As of February 13, 2024, the current threat level in the UK is “substantial” and the current threat level in Northern Ireland is “severe.”

Many Insurance Policies Exclude War-Related Risks

Most commercial property, business interruption, and other insurance policies have a war exclusion that bars coverage for acts of war and related losses. Cyber insurance often includes war exclusions as well. In fact, Lloyd’s of London recently introduced new requirements for war exclusions in cyber insurance policies.

This does not mean businesses cannot obtain coverage for losses stemming from war. However, it does mean they may need to secure standalone coverage for these risks.

What Coverage Do Your Clients Need?

Coverage needs vary between businesses. For example, businesses that operate factories, power plants, or other sensitive facilities in areas with political instability may have elevated coverage needs. Businesses that ship goods internationally or send leaders abroad for meetings may also have substantial coverage needs.

Brokers should review the following needs with their clients:

• How would terrorism, active assailants, riots, civil commotion, or war impact business? Consider the risk of property damage as well as the threat of business interruption and event cancellation.
• Are business leaders exposed to kidnap and ransom risks? If business leaders travel to countries where kidnap and ransom schemes are common, the risk may be significant. Anyone traveling with them, including family or assistants, could also be at risk. In addition to covering financial losses, kidnap and ransom insurance provides risk and crisis management to keep employees and their families safe.
• Are your goods or supplies at risk? As the recent Red Sea attacks show, goods in transit may become targets during international conflict.
• Are you protected from cyber terrorism? Cyberattacks are often as costly as physical attacks, causing damage to computer systems, business interruption, and reputational harm.

Do you need help placing coverage for your clients? Costero offers bespoke war, political violence, terrorism, and kidnap and ransom insurance solutions. Learn more.