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Blog Post

Political violence in 2018: A year of uncertainty

Credit, Political Risk and Terrorism
Geopolitical Risk

By Wendy Peters | February 13, 2019

The political violence landscape of 2018 could be best characterized as a year of frustrations and disappointments.
Four wind-blown red flags on a beach with water in the background

Enduring conflicts in Syria, Iraq, Ukraine and Yemen that were thought to be close to their end-games are only in hiatus. National rivalries and disagreements, peppered with the liberal employment of sanctions and tariffs, have made the global compact appear even more unstable. And the rise in populist movements, the erosion of governance and the increasing activity of far-right extremism, in what appears to be a pushback to globalization, has probably not yet reached its peak.

Amid this turmoil, there are three themes in the terrorism and political violence insurance context that characterize 2018:

1. The changing shape of terrorism

As a physical entity, the extremist Islamic terror group IS/Da'esh, is close to collapse. From its peak, where it controlled an area the size of the United Kingdom, it has been reduced to an area not much larger than Manhattan Island.

It is apparent that the numbers of fighters returning to their countries of origin, particularly in Europe, is not as high as governments had feared. Many are staying to defend the remnants of the Caliphate and consequently are being captured or dying on the battlefield. But whilst their territory shrinks in Syria and Iraq, other IS-affiliated groups are making progress in new areas, particularly in North and East Africa and Afghanistan.

To counter their territorial decline, IS/Da'esh leadership is encouraging supporters to remain in their home countries and engage in local attacks. Their online presence includes guidance on the improvised manufacture of explosives and rudimentary weapons of mass destruction (WMD). But their primary emphasis is encouraging any sort of attack using whatever tools are available: be that knives, acids, vehicles or firearms.

2. The convergence and blurring of state and non-state terrorism

With the ever-increasing use and broadening scope of the online environment, state and non-state actors alike see wider opportunities to exploit the cyber domain to enable or conduct attacks.

Aggressive operations in the virtual domain offer a number of benefits; the barriers to entry are relatively low, a degree of anonymity is possible and operations can be conducted without having to travel to the target location.

But such actions are not confined to the cyber world. The poisoning attacks against the North Korean leader's brother in Malaysia and a former Russian spy in the United Kingdom both demonstrate that some states continue to view assassinations as a legitimate tool of government. The consequences of such events, including the impairment of access to domestic and commercial properties, as well as the longer-term loss of attraction, have been significant to businesses caught up in or near such events.

3. The rise of business interruption losses

Whilst large vehicle bombs are still being employed in countries suffering open insurrections, the trend in advanced economies has been for marauding attacks to occur in crowded places, particularly transport hubs, leisure complexes and urban retail areas.

In many cases the burden of losses, primarily surrounding impairment of access and loss of attraction, fall on small and midsize entities. Many businesses of that size do not own their own premises and may not have purchased terrorism insurance or similar cover. From an industry-sector perspective, the subsequent loss of attraction has been felt by businesses across multiple sectors. Airports, hotels and retail outlets have been most proactive in seeking out further insurance solutions, which focus on business interruption and crisis management.

Reflections

The dramatic rise of IS/Da'esh in 2014 typifies the enduring fluidity of the terror threat. The subsequent attrition of their territory is now leading to the rise of inspired proxy attacks that require less direct command, control, technical capability or logistical support.

If the trend of less sophisticated terrorist attacks continues they could become indistinguishable from extreme domestic political violence. It is also of note that organizations' increasing interest in non-damage business interruption cover, driven by both murderous events and civil disruption, continues to drive the evolution of broader risk management products.

Author

Wendy Peters
Global Head of Terrorism within Financial Solutions