AIG’s Terrorism Meeting Focuses on Security

In the words of security consultant Brian Jenkins, “There will be further incidents of terrorism.”

Jenkins, speaking at AIG’s “Terrorism: The Cost of Risk” meeting in Los Angeles, described the recent “erosion of self-imposed restraints” that security personnel have noted in today’s terrorists. According to him, if God tells a terrorist to do something, his restraints of self-imposed morality have been eroded, evident, for example, in of the Sept. 11 attacks and recent suicide bombings in Israel.

At the top of Jenkins’ recommendations list is improving security in the United States. He notes that the Sept. 11 attacks were planned for at least four to five years and had been virtually undetected by U.S. security, and worldwide.

Among the devastating effects resulting from the terrorist attacks, he said, were some that were unexpected even to the terrorist networks, such as the complete shutdown of the economy. He warned too of the growing and impending concern over further terrorist attack, evidenced in the capture of Al-Qaeda documents, which contained a blueprint for bio-terrorism.

Jenkins says the biggest question Americans now face is whether or not they can respond effectively to another terrorist attack and continue to keep the economy moving. The Sept. 11 attacks, he adds, had a profound effect on corporate security, and it is up to employers to devise a plan that would best manage risk avoidance.

“Expect the unexpected.” Kevin Kelley, chairman and CEO of Lexington Insurance Company added, noting three major trends facing the insurance industry right now, the first of which was the 9-11 attacks. Kelley described some of the lessons learned from the attacks, including immense loss of life, property damage, the fragility of lines of business, and the importance and quality of reinsurance recoverables.

He emphasized that the attacks redefined what a man-made disaster could do. The damages—life, aviation, workers’ comp, accident, and property, among others—became the largest losses ever for each respective area.

Other trends: “What we feel is a tidal wave of third party loss emergence,” and the Enron debacle. Says Kelley, “What lines the World Trade Center did not hit, Enron did,” including D&O, E&O and other lines. He also noted the lack of regulation in the reinsurance market, and the push for change in providing a stable reinsurance market.

Voicing his concerns over the industry’s response to the Sept. 11 attacks, Jack Graham, director of Property Insurance at AIG, remarked it was a negative one. Graham says instead of stepping in to offer additional coverage, the industry took certain coverages out of the market. AIG’s response, he said, was to develop a terrorism policy that would be offered to everyone.

AIG’s terrorism policy covers direct loss or damage to property covered from fire, explosion, or collision of an aircraft or motor vehicle caused by terrorism. The policy offers extensions of coverage on business interruption, loss of rents and extra expense with a 12-month indemnity period. The policy period covers 12 months, or 36 with construction risk. Rates are based on the category of risk.

Jenkins warned, “Right now we are operating under a great deal of uncertainty.”

Reported by Insurance Journal West Editorial Intern Cynthia Beisiegel.

Topics Catastrophe Natural Disasters Market AIG