Identifying terror risks and protecting against them
Acts of terror and politically motivated violence are increasing worldwide. What do German companies need to keep in mind to protect themselves?
Oberkochen, Espelkamp or Tuttlingen: top companies and world market leaders often do not have headquarters in large metropolises, but in countryside towns – and this is especially true for small and medium-sized enterprises in Germany. If you ask an entrepreneur from one of these rural locations whether their company faces an increased terror risk, they frequently brush the concern aside and say, ‘We don’t need terror insurance.’
Terror affects companies in rural locations, too
But operations can indeed be affected, even if an act of terror has not been committed right next door to the company headquarters in Germany. After all, operations rely on smooth flows in the supply chain. Christian Pietsch, head of property insurance at Funk, explains: ‘If, for example, a production site abroad is impacted by a terror attack, it may affect a company’s activities in that local area if machinery or production halls are destroyed or supply routes are blocked. In the worst case scenario, even operations at the company headquarters in Germany are interrupted as a result.’ It’s a similar situation if a key supplier fails to deliver because of a terror attack. These contingency losses and dependent losses can be covered with terror insurance.
Insurance cover and individual needs are decisive factors for protection
Companies are often only protected to a limited extent through their property insurance, or even not at all. Terror risks are automatically covered in fire and business interruption insurance up to a total amount of EUR 10 million. Entrepreneurs can pay an additional premium in order to increase this cover to EUR 25 million. But after EUR 25 million, property insurance no longer does the trick. Terror risks must then be covered with a special terror insurance, which can now also be used to protect against business interruption losses incurred due to a terror threat. Individual solutions are also possible, as Funk terror expert Angela Völk explains: ‘After Brussels became such a big target for terrorism, there were some companies that took out terror cover for Benelux countries due to the increased risk. At Funk we help devise this type of country-specific layer cover and find the right insurance modules.’
In addition to property damage and business interruption, other products on the market provide protection against additional costs, such as when employees of a company are affected by a terror attack. If operations are interrupted, for example, because an employee suffered an injury in the course of an attack, this insurance covers the lost earnings and incurred costs.
Terrorism has a broad definition in the insurance sector
Nevertheless it is sometimes difficult to tell whether fire damage or malicious acts are driven by terrorism and therefore covered by terror insurance. From an insurance perspective, terrorism not only includes attacks by religiously motivated groups like the Islamic State but also politically or ethnically motivated acts that spread fear and terror. Under this definition, attacks by militant anti-globalisation activists, autonomous protest groups and radicals – like the G20 summit protests in Hamburg – can also be considered terrorism. At the beginning of a risk analysis, Funk experts investigate which risks should be covered and which insurance modules would be sensible and practical options for this.
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