1 / 15

Terrorism and the Aviation Industry

Terrorism and the Aviation Industry. November 2006. Contents. What is terrorism? What is the cost of terrorism? Is terrorism insurable? What is the response of the insurance industry? What is the response of the aviation industry? What happens next?. What is terrorism?.

antranig
Download Presentation

Terrorism and the Aviation Industry

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Terrorism and the Aviation Industry November 2006

  2. Contents • What is terrorism? • What is the cost of terrorism? • Is terrorism insurable? • What is the response of the insurance industry? • What is the response of the aviation industry? • What happens next? 2

  3. What is terrorism? • US Army found over 100 definitions of terrorism • Common themes • Inherently controversial • Political judgement • Social bias • Western-centric “Terrorism is the use or threatened use of force designed to bring about political change” 3

  4. What is terrorism? • Terrorist or freedom fighter? 4

  5. What is terrorism? • MI5 tracking 30 Terror plots in UK • 1,600 individuals under surveillance • MI5 increased by 50% since 9/11 – 2,800 Staff (Source: BBC 10/11/06) 5

  6. What is terrorism? 77 Bombings, 51 of which caused deaths 6

  7. What is terrorism? • 23 June 1985 • Air India182 • 329 fatalities (inc 22 crew) • Bomb detonated in cargo hold at 31,000ft (9,500m) • $95m hull loss • $29m liability loss • Deadliest attack pre 9/11 Right front door of Air India 182 recovered from the ocean floor 7

  8. What is terrorism? • Pan Am hi-jacking 1970 Dawson’s Field did not constitute an act of war • “war-like act between sovereign entities” 8

  9. What is the cost of terrorism for aviation? • Security costs USD 5.6 billion a year more than prior to 2001 • Worldwide international passenger traffic is still 5% below pre-9/11 expected trend • Jet fuel has increased from USD 30 to as high as USD 90 a barrel since 9/11 (Source: IATA) 9

  10. Is terrorism insurable? • UK – Pool Re • Spain – Consorcio • South Africa – SASRIA • Israel – PTCF • GAREAT – France • Extremus - Germany • Before 9/11 terrorism loss potential appeared to be manageable 10

  11. Is terrorism insurable? • Terrorist actions inextricably linked to state • Public sector controls ways of influencing, deterring and destroying terrorists • Potential loss is virtually unbounded • Lloyd’s RDS – 5 airports and 15 passenger jets • Inconsistent to turn to private sector for financial protection? 11

  12. Is terrorism insurable? • Insurance industry = loss mitigation and financial recovery • Partnership between insurance industry and government most cost-efficient way to manage terrorism? • Mandatory insurance – greatly expands risk community, spreads risk through society, cover for landmark risks remains affordable • A public problem addressed by a national solution? 12

  13. What is the response of the insurance industry? • Traditional insurance market slow to react to clients needs following substantial reduction in level of cover provided post-9/11 • Opportunist markets providing high level insurance policies at a premium • Berkshire Hathaway • AIG • GE Frankona • US Government utilises Homeland Security in order to secure coverage including hull war at low cost • Today, the traditional market now has an appetite for liability war risk 13

  14. What is the response of the aviation industry? • Security improvements – watch lists, advance passenger information, air marshals, fingerprinting • Contingency planning and coordination for airports • But, unharmonised measures create passenger confusion and inconvenience • Aviation premiums average 15.5% higher than pre 9/11 • Premiums = 70% of total risk management costs • 2/3 of airlines have company-wide risk management strategy • Risk management = 2.1% of airlines total revenues 14

  15. What next? • AEA Action plan • Global Aviation Security Action Group 15

More Related