Agenda

Section I – The Terrorism Market • A History of Terrorism Insurance • Defining Terrorism in the US • Coverage scenarios

Section II – R5 • An Evolving Risk • FBI Study • Hiscox R5

– Active Shooter – Threat – NCBR

Q&A

A History of Terrorism Insurance

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Pool RE

• Formed in 1993 following a series of terrorism incidents in the early 1990’s in London and elsewhere in England related to the situation in Northern Ireland at that time.

• Members include the majority of major property insurers in the London market.

• In the event of a loss resulting from an act of terrorism, each Member must first pay losses up to a policy threshold.

• When losses exceed that threshold, the insurer can claim upon Pool Re’s reserves, which now stand at almost £6 billion.

• Pool Re has paid out claims of more than £600 million at no cost to the UK taxpayer.

• Some Lloyd’s markets began writing standalone terrorism policies covering assets outside of the UK

A History of Terrorism Insurance

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TRIA

• U.S. Government program created to stabilize the Insurance industry after 9/11.

• Pre 9/11- terrorism coverage was silent

‒ 2,976 killed, $40B in Loss

• After 9/11- limited availability in high risk areas

• Terrorism Risk Insurance Act (TRIA)

‒ Signed into law Nov 26, 2002

‒ Intended as a temporary program while private market formed

‒ Not a pool. Shared loss program (Private Industry, Government, Policyholders)

• Extended in 2005, 2007, and 2015.

A History of Terrorism Insurance

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Private market expands in Lloyds • MAP Syndicate in Lloyd’s, post 9/11, produced a standalone

terrorism property wording that they called “T3”.

• T3 is commonly used in the market to refer to any Terrorism-only policy. These are private-market solutions to cover terrorism risk.

• The T3 was not adapted by Lloyd’s until 2006 when the LMA was asked to produce an LMA version of MAP Syndicate’s wording. This was given Lloyd’s wording reference LMA3030.

• Many carriers and MGA’s today brand their standalone form as “T3”, but many of them vary widely and include exclusions that are not on the Lloyd’s LMA3030 wording.

Defining Terrorism in the US

Defining Terrorism

FBI / Code of Federal Regulations • Involves violent acts or acts dangerous to human life that violate federal or state law; • Appears to be intended (i) to intimidate or coerce a civilian population; (ii) to influence the policy of a

government by intimidation or coercion; or (iii) to affect the conduct of a government by mass destruction, assassination, or kidnapping

Department of Defense • The unlawful use of violence or threat of violence, often motivated by religious ,political, or other

ideological beliefs, to instil fear and coerce governments or societies in pursuit of goals that are usually political

Department of State • Premeditated, politically motivated violence perpetrated against non-combatant targets by subnational

groups or clandestine agents

FEMA • The use of force or violence against persons or property in violation of the criminal laws of the United

States for purposes of intimidation, coercion, or ransom. Terrorists often use threats to: ‒ Create fear among the public ‒ Try to convince citizens that their government is powerless to prevent terrorism ‒ Get immediate publicity for their causes

Defining Terrorism

TRIPRA • The term act of terrorism means any act that is certified by the Secretary of Treasury, after consulting

with the Secretary of Homeland Security, and the Attorney General of the United States: – To be a violent act or an act that is dangerous to human life, property, or infrastructure; – To have been committed by an individual or individuals as part of an effort to coerce the civilian

population of the United States or to influence the policy or affect the conduct of the United States Government by coercion

Lloyd’s Market Association – An act or series of acts, including the use of force or violence, of any person or group(s) of persons,

whether acting alone or on behalf of or in connection with any organisation(s), committed for political, religious or ideological purposes including the intention to influence any government and/or to put the public in fear for such purposes.

ISO (non TRIPRA) – "Other act of terrorism" means a violent act or an act that is dangerous to human life, property or

infrastructure that is committed by an individual or individuals and that appears to be part of an effort to coerce a civilian population or to influence the policy or affect the conduct of any government by coercion, and the act is not certified as a terrorist act pursuant to the federal Terrorism Risk Insurance Act of 2002.

Defining Terrorism

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Terrorism?

Global Terrorism Database.

Fort Hood Texas, 2009 • Nov 5th 2009. Killeen, TX – Nidal Malik Hasan, A US

Army Major killed 13 and wounded 31. • American Born Muslim of Palestinian descent. • In communication with Anwar al-Awlaki, senior al-

Qaeda strategist, in the months prior to the shooting. • Congressional Homeland Security Committee

classified the event as terrorism, however this was classified as work place violence by Department of Defense.

• Dec 2015 Defense Authorization bill passes Senate, including a provision making the victims eligible to receive the purple heart. In a public address, President Obama mentions Fort Hood attack in same breadth as other “terrorism” events.

Terrorism?

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Boston Marathon, Apr 15th 2013. Boston, MA • April 18th 2013. President Obama names bombers “Terrorists”. • Dzhokhar Tsarnaev, while in custody, states he and his brother were radicalized by

videos of Anwar al-Awlaki. • Investigators state that events were clearly religiously motivated. • For insurance purposes, not a TRIPRA qualified event unless the Secretary of Treasury,

State and Attorney General all agree (after dollar thresholds are met).

Terrorism?

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University of California, Santa Barbara. 2014 • May 23rd, 2014. Isla Vista, California. Elliot Rodger kills six and injures 14 in attack

aimed at Alpha Phi sorority house. • Prior to the events, Rodger uploads a video to YouTube in which he details his

motivations for the upcoming attack. • In the video and subsequent autobiographical manuscript titled “My Twisted World” , he

states that he wanted to punish women for rejecting him and to punish men for living a more enjoyable life than he.

Terrorism?

The Orange Country Register, Dec 3, 2015

San Bernardino, CA. 2015

Terrorism?

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Cascade Mall, Burlington, WA. September 23rd 2016. • 5 people shot and killed near a cosmetics counter at Macy’s department store • According to court records, the suspect had prior arrests, had been involuntarily

committed for psychiatric treatment after several violent incidents, and was under a court order not to possess firearms

• Exact motive unclear at this time

http://www.seattletimes.com/seattle-news/crime/police-confirm-suspect-tried-to-buy-handgun-at-store-just-before-cascade-mall-shooting/

If it’s Gray, Do we Pay? - TRIPRA Untested, Precedent Is Minimal Boston Marathon • As of Jan 24th 2014 (284 days later), Massachusetts’ 25 largest property and casualty insurers had

declined to make any payments on 85 of 207 claims stemming from the attacks. - Cybersound Recoding Studio claim denied because the Insurer claimed the business was not shut

down by civil authorities in the aftermath of the bombings. - Fire & Ice eatery eventually receives reimbursement after lengthy fight over whether the bombing and

subsequent manhunt were separate coverage events. - Sir Speedy print shop sues insurance agent as a result of unpaid claims from financial damages

suffered during their 14 day shutdown. Alleges agent did not clearly explain $5M trigger.

“Batman” Shooting • July 20th 2012. James Holmes kills 12 and injures 70 at Cinemark theater in Aurora Colorado during a

screening of Batman:The Dark Knight Rises. Additionally, Holmes’s apartment was later found to be booby-trapped with explosives, which were not detonated.

• May 19th, 2016. Jury finds Cinemark not liable for the rampage after defendant argued that management could not have anticipated a shooting at a theatre with no history of serious violence.

San Bernardino • Widow of Dec 2nd 2015 attack files $58 million lawsuit against San Bernardino County and the

Department of Health Services.

https://www.bostonglobe.com/business/2014/09/11/terrorism-insurance-threshold-hasn-been-met-marathon-bombing/gU8NnGmvflmNWMztQKT9SN/story.html http://www.bloomberg.com/news/articles/2014-04-17/boston-attacks-mark-major-shift-in-who-s-buying-terror-insurance

https://www.bostonglobe.com/business/2014/03/12/businesses-still-struggle-settle-bomb-related-insurance-claims/LPoluWZ88Jksp2EXXOqw4J/story.html https://www.washingtonpost.com/national/widow-of-san-bernardino-shooting-victim-files-58-million-lawsuit/2016/01/13/01faa664-ba39-11e5-99f3-184bc379b12d_story.html

An Evolving Risk

An Evolving Risk - Recent Events

JANUARY 8, 2016 PHILADELPHIA, PA A policeman was shot and seriously injured while on patrol, the attacked pledged allegiance to the Islamic State.

JUNE 12, 2016 ORLANDO, FL Orlando Nightclub Shooting, worst in modern history. 49 dead, 53 injured.

JULY 7, 2016 DALLAS, TX War veteran ambushes a group of police officers during a peaceful protest, killing 5 and injuring 9. Deadliest incident for U.S. law enforcement since 9/11 attacks.

JUNE 18, 2015 CHARLESTON, SC 22 year old neo-Nazi man charged with 9 counts of murder after firing on a group gathered at Emanuel African Methodist Episcopal Church

JANUARY 10, 2016 COLORADO SPRINGS, CO A gunman entered a Planned Parenthood clinic and started firing, killing 3.

FEBRUARY 21, 2016 KALAMAZOO, MI In a random act of violence a gunman opened fire outside an apartment complex, a car dealership and a restaurant leaving 6 people dead.

OCTOBER 1, 2015 ROSEBURG, OR 8 students and 1 teacher killed by Umpqua Community College by a current student. All 14 owned guns had been purchased legally.

http://timelines.latimes.com/deadliest-shooting-rampages/

JULY 5, 2015 AUSTIN, TX At 4:48 am ,a man armed with a rifle begins shooting at the Omni Austin Hotel Downtown. The shooter was killed during an exchange with law enforcement

An Evolving Risk

• Work Related Conflict / Personal Conflict

• Robbery / Economic Motivation

• Angry Customer / Supplier

• Obsessed Stalker

• Other

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• Political Motivation

• Religious Motivation

• Ideological Motivation

• Intimidate or Coerce Civilian Population

• Affect Government Policy

OTHER MOTIVATIONS TERRORISM

• Is the intent political, religious, or ideological? • If there is no property damage, is business

interruption loss covered? • What other damages does can a business

suffer after a shooting event?

An Evolving Risk

19 http://www.apa.org/news/press/releases/2016/08/media-contagion-effect.pdf

Increased awareness?

• Recent shooting events have prompted an influx of inquiries from our insureds and brokers with respect to available coverage

• 24-hour news channels and social media may be increasing their coverage of violent incidents, raising the perceived threat

• Some suggest that the increased level of media exposure could be increasing the level of mass shootings

– In a recent paper titled “Mass Shootings and the Media Contagion Effect” presented at the American Psychological Association annual conference, Jennifer Johnston and Andrew Joy suggest that increasingly intense media coverage of mass shootings is partly to blame

– The majority of mass shooters are depressed and socially isolated

– Shooters  fixate on mass shootings as a way to “regain social capital” through the fame they know the media will bestow upon them with non-stop coverage of their crime

Active shooter incidents: 2000-2013

Parameters • Implicit in this definition is that the

subject’s criminal actions involve the use of firearms.

• Incidents identified in this study do not encompass all gun-related situations

• The study does not encompass all mass killings or shootings in public places

• Study does not include gang or drug violence

http://www.fbi.gov/news/stories/2014/september/fbi-releases-study-on-active-shooter-incidents/pdfs/a-study-of-active-shooter-incidents-in-the-u.s.-between-2000-and-2013

FBI Active Shooter Study • “An individual actively engaged in killing

or attempting to kill people in a confined and populated area.”

• Active shooter is a term used by law enforcement to describe a situation in which a shooting is in progress and an aspect of the crime may affect the protocols used in responding to and reacting at the scene of the incident. (excluding shootings related to gang or drug violence).

• Unlike a defined crime, such as a murder or mass killing, the active aspect inherently implies that both law enforcement personnel and citizens have the potential to affect the outcome of the event based upon their responses.

Active shooter incidents: 2000-2013

Relevant Summary Data • 160 incidents (2000-2013)

– 1,043 casualties 486 deaths 557 wounded

– 158 of 160 involved a single shooter – Median # killed per/incident = 2 – Median # wounded per/incident = 2 – 66% of cases ended before police

arrived – 24% Educational environments – 9.4% Open public spaces

https://www.fbi.gov/file-repository/active-shooter-study-2000-2013-1-1.pdf/view

73 of the 160 incidents occurred in an environment related to commerce.

Businesses closed to pedestrian traffic • 23 incidents

• 69 killed / 73 wounded

• 22 of the 23 shooters were employed/previously employed at the business – 14 current employees – 4 employees fired on day of shooting – 3 former employees – 1 suspended employee

https://www.fbi.gov/file-repository/active-shooter-study-2000-2013-1-1.pdf/view

Businesses open to pedestrian traffic, including shopping malls

• 50 incidents • 141 people killed / 199 wounded • 72% of shooters not employed at

location

Hiscox R5

Hiscox R5

• We want to offer coverage solutions that fulfill our customer’s needs.

• We provide more than just a promise to pay claims

• We want to set ourselves apart from the competition by differentiating our coverage and capacity with five values

– Rapid with our Response

– Committed to our insured’s Recovery – Strategic with partnerships to help insured’s Rebuild and Renew their reputation

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R5 – Active Shooter

• An Active Shooter event is defined as a shooting event that: – Involves the use of a firearm – is intended to harm another person or group

of persons; and – is carried out or attempted by any person or

group of persons acting alone or on behalf of or in connection with any organization

• Active Shooter coverage does not have to be triggered by physical damage or bodily injury.

• Motive does not have to be political, religious, or ideological

R5 – Active Shooter

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• Active Shooter coverage includes: • Indemnity for business interruption

– Period of indemnity up to 180 days + Indemnity for extra expenses to reduce BI loss – An additional 90 days for extended period of indemnity

• Indemnity for crisis management, including up to: – $250,000 for additional security – $250,000 for counseling – $250,000 for public relations

• Indemnity for ingress/egress income loss if shooting event occurs within 1 mile of insured’s location. Up to 10 days indemnity

• Indemnity for loss of attraction income loss (cancellations) if shooting event occurs within 1 mile of insured’s location. Up to 30 days indemnity

• This policy will sit primary as respects “other insurance”

R5 – Active Shooter

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• It is not our intent to cover loss resulting from: • Threat of an active shooter event or a hoax

• Organized crime, gang-related activity, or domestic violence

• Explosive devises

• Suicide or attempted suicide

R5 – Malicious Threat

Policy is activated if a malicious threat (not limited to terrorism) occurs and: • One or more of your premises are evacuated

• Staff or the public are prevented from leaving your premises

• Access to your premises is prevented by order of a civil or military authority

• The Hiscox Threat policy provides: • Indemnity against lost revenue for the length of time

the business is interrupted, up to 10 days per occurrence.

• Crisis management services and post loss assessment provided by our partner, Control Risks.

28 2015 Control Risks Consultancy Services Report

R5 – Malicious Threat

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• It is not our intent to cover loss resulting from: • Physical loss or damage to named locations

• Threat of a natural catastrophe

• War

• Nuclear, Chemical, Biological, Radiological

R5 - NCBR

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• Nuclear, Chemical, Biological, Radiological covers clients in the wake of a malicious nuclear, chemical, biological and/or radiological act.

• Coverage includes business interruption, extra expense, blast damage sustained from detonation of a NCBR weapon, decontamination and clean up costs, and demolition and debris removal costs.

• No physical damage trigger. Hiscox NCBR form is triggered by a release or dispersal of NCBR material and a civil or military authority issues a written order.

• There is no distance limitation on origin of attack. During a NCBR event, there can be difficulty in identifying the source of an outbreak. Therefore, we do not have a limitation on the origin of attack (ie. within one mile of insured location.)

• Control Risk Services that can help clients assess, manage and enhance their NCBR response strategy. As well as pre-loss advice, Hiscox clients have access to a Control Risks 24/7 helpline and support following an incident.

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Questions

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