Countering the Threat of TerrorismA Product to Manage Risk At Home and Abroad

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Countering the Threat of TerrorismA Product to
Manage Risk At Home and Abroad
AIG Property Terrorism Facility 2003Information
on the Risk and the AIG Companies product
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Recent Terrorist Attacks Worldwide
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Monday, September 13, 1999 A powerful explos
ion ripped through an apartment building in
southern Moscow early Monday, killing at least 23
people and leaving dozens unaccounted for. The
Ministry of Emergency Management said at least 23
people were killed in Monday's explosion. The
event leveled the building, which housed about
150 people. CNN
Saturday, August 7, 1998 A bomb explodes in Nair
obi, Kenya -its target is the American Embassy in
Kenya resulting in more than . . . 500 million
dollars worth of damages including those
sustained by twelve nearby complexes. (291
deaths and over 5,000 wounded) BBC
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The US Grapples with Terrorism
Sept. 11, 2001 considered the worst attack in
history, hijackers crashed two planes into the
WTC eventually causing its collapse and the loss
of nearly 2,800 lives. In a related incident,
the Pentagon was attacked causing death and
injury to several hundred civil servants. Total
costs for the two attacks are estimated at more
than 40 billion.
April 19, 2001 - a memorial was held to mark the
sixth anniversary of the Oklahoma bombing which
killed 168 people and commenced the era of a new
threat intra-terrorism. It also caused
several million dollars in property damage.
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Largest Insured Losses From Terrorism 1970 to
2001 EVENT COUNTRY F
ATALITIES INSURED LOSS
(MILLIONS OF 2001 U.S. )
Attacks on World Trade Center and Pentagon , 2001
U.S. 3,014 40,000
Bombing in Londons Financial District,
1993 U.K. 1 907 Bombing in Manchester
shopping mall, 1996 U.K. 0 744
World Trade Center Bombing, 1993 U.S.
6 725 Bombing in Londons Financial District, 1
992 U.K. 3 671 Suicide Bombing at Col
ombo Intl Airport, 2001 Sri Lanka
20 398 Bombing in Londons South Key Docklan
ds, 1996 U.K. 2 259 Oklahoma City Bomb
ing, 1995 U.S. 166 145
Explosion in PanAm Boeing 747 over Lockerbie,
1998 U.K. 270 138 Dynamiting of three hij
acked planes in Zerga, 1970 Jordan
0 127 source Economic Perspectives On Ter
rorism Insurance published in May 2002 by the
Joint Economic Committee of the U.S.. Congress
(available via internet www.house.gov/jec/terro
rism/insur.pdf)
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Terrorism Market Trend

• WTC Attack September 11 many insurers and
  reinsurers sustained terrorist-caused losses that
  were once considered inconceivable and not
  priced for.
• WTC 9-11 Losses Financial impact on Insurance
  Industry
  
• Some companies restructuring or withdrawing from
  market
  
• Strain on Capital Surplus Insolvencies ?
  
  
• More to come ?
• Reinsurance market began to place more stringent
  demands on the placement of terrorism coverage on
  property placements worldwide.
  
• Insurance Industry has taken a hard stand on
  terrorism and for many commercial property
  policies, terrorism coverage has been excluded.

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The Business Cost of Terrorism
Government and corporate interests face
increasing risks worldwide American businesses
are now seen as the largest target of terrorism,
but no business is immune This fact translates
into risk of business interruption losses,
increased capital expenditures, and employee
casualties
Terrorism Insurance helps control the cost of
this risk
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How Do We Evaluate The Risks ?
Threats - Are you exposed ? Terrorist Groups S
ome active only within a given country (e.g,
FARC) Others active in many countries (e.g., Al
Qaida) Are you in a hot country where there ar
e terrorists ? Are you a Target of one or more
terrorist groups? Vulnerability - How vulnerab
le are you? Security Management control Stro
ng security discourages direct attacks
Management control reinforces strong security
Location (your building surroundings) --
just being near a Target puts you at risk
Properties around NY World Trade Center
Hilton Hotel at Colombo, Sri Lanka
Bombing in Ealing, West London
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Threats

• Political organizations pose the greatest danger
  
  
• GLOBAL Al Qaida created a gobal terrorist
  network to attack
  
• Western or
  anti-Islamic interests
  
• REGIONAL -- such as
• Jemaah Islamiyah in Southeast Asia
• Hizballah in Middle East
• COUNTRY SPECIFIC -- there are dozens, such as
• Moro Islamic Liberation Front (Philippines)
• Hamas, Fatah and many other Islamic groups
• Basque Separatists (Spain)
• Revolutionary Armed Forces of Colombia (FARC)
• Aum Shinrikyo (Japan)
• Peoples Revolutionary Militia (Ecuador)
• Non-political organizations can also pose a
  danger
  
• Animal rights activists
• Anti-abortion or Right To Life activists

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Prospective Customer Groups
Group 1) Target Risks - for example
Trophy buildings Government properties (e.g.,
U.N., Euro Parliament) Infrastructure risks, su
ch as Electric Power Generation Electrical and
Gas Distribution Water Utilities Transportati
on (airports, railroads, bridges, tunnels)
Telecommunications Major hotels shopping mall
s Exhibition Centers, Stadiums Arenas Banking/
Financial Services Chemical and Petrochemical Pl
ants Oil Refineries, Natural Gas Plants, Tank F
arms Icon risks (huge brand names)
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Prospective Customer Groups (continued)

• Group 2) Financial Institutions
• Mortgage portfolios of financial institutions
  where the loan covenant may not tolerate
  insurance ex-terrorism
  
• Group 3) Real Estate Managers / REITs
• Fiduciary liability may require manager to
  procure coverage if available.
  
• Group 4) Major National / Multinational
  Companies
  
• If Property program has a terrorism exclusion
  and client has some exposures (e.g., close to a
  target risk or in high-risk country)

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AIG Companies Property Terrorism Facility - Summa
ry
Coverage Direct physical loss or damage to
property covered caused by an Act of
Terrorism. Key Exclusions Electronic or cyber
attack War risks, SRCC, VMM nuclear, biologi
cal, chemical Extensions of Coverage available
Loss of Income (Business Interruption)
12 months indemnity period is standard longer
period can be considered. Direct BI only -- no C
ontingent BI , Utilities Service or Denial of
Access. No ALOP cover for Course-of-Construction
risks Scheduled Locations Only Coverage only
applies to locations on schedule with address and
declared value. No blanket coverage Each loc
ation must have a specific value declared for
each coverage (PD and BI) that is desired for
that location. more . . .
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AIG Companies Property Terrorism Facility - Summa
ry
(continued)
Policy Period 12 months is standard, up to 18 m
onths maximum Exception up to 48 months for Cou
rse-of-Construction risks Capacity Up to 100
M per event and aggregate for policy term
Maximum 100 M term aggregate for each client
(for parent and subsidiaries/affiliates
combined) Standard Deductibles PD 2 of TI
V per location, min. 50,000 BI / Loss of Income
30 days waiting period deductible
Premium Priced according to risk normal
minimum 50,000.
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Information Required for Quotation
AIG Property Terrorism Application completed and
signed by the client, providing the
following Premises Schedule showing PD value
s and BI values per location (need address
including postal code) Description of Risks(s) a
nd surroundings . Security Information -- Perime
ter Security and management control
Loss history -- including any terrorist
incidents or threats Proposed Inception Date
Requested Limit Requested Deductibles (if diffe
rent from standard)
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Why the AIG Companies? Advantages
Capacity -- Up to 100M term aggregate in limits
for a given client Financial security of the AI
G Companies No Classes/Risks are Excluded --
The AIG Companies are prepared to offer a
quotation on any variety of risks
Threat Assessment Available -- On-site assessme
nt available through Clayton Consultants, Inc. or
one of the other security specialists with which
the AIG Companies work.
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Why Now?
How prepared are you to absorb Terroris
m losses ?

Will capacity available today
be available tomorrow ???
Act now to protect your assets and income
with the AIG Companies !

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AIG CompaniesProperty Terrorism Insurance
To obtain a quotation or additional information,
please contact your broker or your local AIG
office.