Current events across the globe have resulted in many businesses taking a closer look at their insurance policies to decipher what events would be covered.

The answer is not always clear because different policies respond in different ways. Businesses and their insurance brokers are left to select policies they believe will provide the broadest coverage at the most economical price.

Planning for the next malicious act

One of the biggest challenges businesses face today is planning for the next malicious act. Perpetrators continue to change their tactics, making it virtually impossible to contemplate and plan for risk mitigation in all malicious act scenarios. We have seen attacks carried out with bombs, guns, knives and most recently a 19-ton truck. These malicious acts instill fear in the public and also result in severe financial consequences for the businesses affected.

A malicious act carried out at a business can result in property damage, loss of income, reputational damage and loss of intellectual capital. Employees may suffer from long term psychological consequences, bodily injury or in some severe cases, even death.

Consider the following scenario: Police receive notification of a shooter at a large upscale shopping mall. Minutes later, when they arrive at the scene they realize the gunman has fired shots and taken some customers hostage. While the police are rapidly carrying out protocols to save the hostages, they are understandably not likely to be thinking about the financial consequences to the shopping mall owner of the shooter at large.

Conversely, while the shopping mall owner is going to be doubtlessly concerned about the hostages' wellbeing and empathetic to the public's anxiety, the owner is simultaneously anxious about the immediate and long-term effects on its business because of the shooting. Within a matter of moments, the reputation of the business is on the line, and the owner's response to the malicious shooting act is pivotal. Future foot traffic and sales are on the line that day and every day following the malicious act.

Develop a response plan

Developing a sound response plan to a malicious act is challenging. The following three factors need to be considered:

  • Risk transfer via a selection of insurance policies can be challenging for businesses and their brokers to sort through. There are many types of coverage to take into consideration, including Property, Casualty and Terrorism. Insurance products vary from carrier to carrier and coverage forms may not be amended as quickly as malicious acts evolve in the world we live in. It's best for businesses and their brokers to identify the coverages that are most important to them and to read the corresponding forms carefully. Any areas that are grey or silent should be discussed with underwriters before the policy is purchased. The form shouldn't be read through for the first time when a post-loss claim is filed.
  • Risk mitigation through planning and practice takes even the best funded businesses a lot of time. Plans should be reviewed by many areas of the business including risk management, human resources, legal, marketing and communications. Once reviewed and agreed upon, they can't just sit on a shelf. Plans must be communicated to employees and practiced regularly so any kinks are ironed out before a malicious act occurs. Many risk mitigation plans are never actually put into action because the business never sustains a loss. It's better for your business to be prepared for the worst than to reduce expenses by cutting out planning and simply hoping for the best.
  • Public relations and crisis response management is more important now than ever before, given the 24-hour news cycle and the instantaneous nature of social media coverage. The way in which businesses handle the press can make or break the long-lasting financial impact of the malicious act. Businesses that have strong communications teams on staff may still want to consult with external third-party resources for guidance and real time support. Public relations firms specializing in crisis management know how to prioritize stakeholders, triage media inquiries and conduct social media monitoring. Although public relations may not be the first thing that comes to mind in the aftermath of a malicious act, an effective crisis management response should dovetail with business-continuity planning and can pay dividends for long-term reputation management.

Today, businesses are more concerned about lone wolf attacks versus another 9/11. Terrorism risk is evolving and the market for terrorism insurance must evolve too.

Jen Rubin is Product Head – War, Terrorism & Political Violence, Hiscox USA. She can be reached by email at Jennifer.Rubin@HISCOX.com and by phone at 646-452-2353. Opinions expressed are the author's own.

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