Energy firms must manage new terror threats

A number of recent acts of terrorism and violence against energy companies and their facilities around the world have led to an upsurge of interest in terrorism and political violence coverage. This is being matched by buoyant levels of capacity in the sector, despite a sense of unease among insurers underwriting these risks.

That is the conclusion of an Energy Market Monitor report by Marsh. New entrants and new products mean the market is growing but becoming very competitive, the report said. It estimates that the terrorism per risk market capacity now stands at circa $1.5 billion, with new entrants driving competition and gaining reductions in certain benign territories.

“However, there is a growing sense of unease and a pre-apocalyptic sensation as markets watch from the sidelines the fallout from the devastation in Syria and the quiet instability in Bahrain. The world watched live events unfold in Algeria, which immediately caused the terrorism market to tighten their string on North African capacity,” the report said.

But this has not impacted the availability of capacity. “The terrorism and political violence book continues to grow as world events fuel the fire for numerous enquiries. These enquiries are no longer a formality but a necessity for boards. We have seen a large increase in firm orders as companies understand the inherent value of the coverage,” the report said.

In a separate event hosted by Marsh called Engineering for Success: Managing Emerging Risks held in Abu Dhabi this month, the broker also highlighted the growing exposure of oil and gas firms globally, but especially in politically sensitive geographies, to cyber threats. Such attacks can potentially cripple national energy supplies.

“Cyber attacks on oil and gas installations can have an added ideological or political motivation, where the ultimate goal is to undermine government agendas or deter investment,” said Robert Robinson, a managing director in Marsh’s Energy Practice. “These attacks can potentially trigger unscheduled shutdowns in refineries, platforms and other installations; the consequences of which range from brief interruptions to operations and property damage, to environmental pollution and even loss of life.”

According to Marsh, the cyber threats facing the global energy sector stem from both malicious intent and low levels of awareness among employees of the risks associated with internet usage and connecting personal devices to company systems.

Stephen Wares, leader of Marsh’s Cyber Risk Practice in Europe, the Middle East and Africa, commented: “While traditional business interruption insurance policies require physical damage before a claim can be made, specific cyber insurance policies providing broader cover are gaining increased attention among oil and gas firms. But only by understanding the nature of the threat, developing and rigorously applying robust risk engineering procedures to deal with cyber attacks and, above all, being vigilant to this constantly evolving risk can oil and gas firms effectively protect their installations.”