U.K. Experts Warn of Continuing, Evolving Global Terrorist Threats

A leading U.K. intelligence expert and a specialist in terrorist underwriting at Hiscox Plc have warned that the threat of terrorism will not diminish in the year ahead with the continued potential for attacks around the world.

Simon Sole, managing director of Exclusive Analysis in an interview published on the Lloyd’s Website (www.lloyds.com), indicated that the continuing war on terror “will continue to reverberate throughout the Middle East, and will also impact the risk environments of Western Europe and America.”

He warned that “the definition of Sunni extremism will continue to evolve from ‘al-Qaeda’ into a ‘green-shoots’ model which will see a series of independent groups developing capability based on their local resources,” said the report. “The bomb attacks on London in July last year are seen as a case in point of the new breed of terrorist.”

Sole noted that both the U.K. and the U.S. would again be at risk by small groups planning further terror attacks. “Attacks will also likely become more effective over time as groups learn from each other and the mass media coverage of intelligence efforts and counter-terrorist activities,” he stated.

He added that the key to preventing further attacks is intelligence, not security, and observed that “intelligence services are being stretched to capacity and significant intelligence reform is unlikely.”

Lloyd’s notes that the “London market insurers have been told that the long term outlook is negative, with attacks likely to diversify away from the transport network to places of public entertainment and other major cities, such as Manchester and Birmingham in the U.K.”

It said the study “indicates that the U.S. continues to be at risk from another Sunni extremist attack, however it also concludes that such an incident would probably be small as al-Qaeda has been disrupted and new groups are less capable.” Sole observed: “The ability of a group in the US to stage an attack is constrained by stringent counter-terror measures at the expense of civil liberties.” But he added that this new development is a double-edged sword. “Those counter-terror measures are ultimately a risk negative strategy as they alienate the very communities with whom intelligence relationships are needed,” he explained.

New York, Los Angeles and Washington DC are seen as the cities most consistently threatened with subway systems, synagogues and U.S. government sites the highest risk targets.

The future will see an evolving terrorist threat, as “those Sunni extremists drawn from other parts of the Middle East to fight Americans on the front line start to return to their homelands, bringing with them enhanced bomb-making and combat capabilities.” Executive Analysis identified Jordan, Syria, Kuwait, Yemen and Saudi Arabia as countries where there is a likelihood of increased terrorist activity.

In Western Europe, Sole indicated that the company believes those countries most at risk of an attack from Sunni extremists are the UK, Italy, the Netherlands, Spain and France. Those at risk, but to a lesser degree, include Germany, Belgium, Denmark and Norway.

Continuing the analysis, the report said the “aviation and transport sectors in Spain, the UK, Italy, the Netherlands and Belgium are seen as the most likely terrorist targets, while large public gatherings such as theatres, events and shops have received fewer threats but are also vulnerable. US military bases in Germany are also seen to be at risk.

“There is also the warning that in the UK any stagnation between the UK Government and Irish republican paramilitaries may well lead to republican dissidents rejoining the struggle with attacks on British-owned property and security services becoming likely in 2006 to 2007.”

Lloyd’s noted that the “analysis comes as a leading terrorism underwriter at Lloyd’s says the market is becoming increasingly competitive as more insurers look to balance their risk portfolio in the wake of the US hurricane season.”

Stephen Ashwell, war terrorism and political violence underwriter with Hiscox, indicated that insurers with big natural catastrophe and earthquake cover are looking to terrorism as a new area to underwrite as it broadens their risks classes and is a significantly different type of risk to the natural catastrophe business. “On the whole I would say the rating environment for terrorism is quite flat,” he stated. “I think the analysis is well founded and when the insurgents who have been trained and are operating in places such as Iraq return to their homes there is the likelihood that they will seek to continue their activities. The fact remains that the actions of these insurgents can act as a motivator for other disaffected members of the community.”

Ashwell added: “With terrorism insurance, the key is to understand the risks that you are underwriting. My advice to clients has long been to look at the levels of security and risk management you have in place. When you have addressed the security of your staff and your premises you can then buy the adequate cover from the market.”

He also noted that “Lloyd’s contains some excellent and experienced terrorism underwriters who, like Hiscox, have been operating for many years and have been paying claims and will continue to do so. In terms of demand we tend to find that following a significant event such as the attacks on London last year there is a four to six week period where there is a significant increase in the number of inquiries and then the demand levels off. People tend to look at terrorism in terms of isolated and significant attacks but if you take a global view there is a terrorist incident every day of the week. However they will vary. The issues in terms of terrorism in say Colombia, are vastly different to those in Iraq, the UK and the US.”