Terrorism, Workplace Violence, and Insurance Implications

workplace violence
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Several recent manmade disasters, including the attack at Pulse nightclub in Orlando, FL, and the Brussels airport terrorist bombing, highlight the vulnerability of the workplace. Terrorism and workplace violence costs employers over $120 billion a year, according to the National Institute for Occupational Safety and Health (NIOSH). As the chance of an onsite attack rises for employers, the focus is on mitigating risk is increasing.

According to several security experts, most instances of workplace violence are committed by one person acting alone. So-called lone wolf attacks are difficult to predict. Most terrorism models are used to predict larger incidents like bomb attacks, according to Charlene Chia, senior risk consultant with AIR Worldwide, who spoke on workplace violence and terrorism risk at a recent Marsh webinar. [Marsh is a global leader in insurance broking and risk management.]

Tarique Nageer, terrorism placement advisory leader for Marsh’s property practice, explained that there has been an increase in frequency in workplace violence aimed at civilian targets, including more lone wolf attacks resulting in more deaths. The potential costs associated with lone wolf attacks include property damage, business interruption as well as employee injuries and losses.

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According to Chris Flatt, leader of Marsh’s Workers’ Compensation Center of Excellence, workplace risk has increased as more workplace violence incidents occur in less secure locations. Flatt went on to explain that terrorism is absolutely a workplace safety risk.

Many examples of terrorist attacks in the last few years have happened at or near workplaces, including the recent Orlando shooting. The victims included both employees and customers of the nightclub. The San Bernardino shooting last December also occurred in a workplace setting. The Paris attacks in November included several people being shot in or near bars and restaurants in the theater, with employees there being some of the first victims. Platt sees a shift in terrorism attacks towards softer targets like workplaces committed by lone wolves. Retail store safety could be compromised.

As a result of increasing incidents of terrorism and workplace violence, the worker’s compensation insurance market had been an increasingly difficult one for employers. The Terrorism Risk Insurance Program Reauthorization Act of 2015 has now stabilized that market and is effective until 2020. Under its new requirement, the aggregate loss trigger increases from $100 –200 million. Before, worker’s comp insurers were selective in the risks they would accept. Some insurers were simply refusing to renew certain customers. State funds, otherwise known as markets of last resort, were concerned that they could be flooded by a large number of employers seeking help, thus pushing them beyond their normal appetite for risk. The reauthorization restored workers comp insurer’s appetite for concentrated risk, therefore stabilizing the market. The appetite for insurers to cover terrorism and workplace violence risks has improved.

A key factor in determining worker’s comp rates is the size of employee populations concentrated in a single location and the associated potential loss. Insurers want to know the number of shifts at a location, whether a campus setting exists and the maximum number of employees in a building at any given time. For any company, the more accurate employment and exposure data they can supply an insurer, the better chance insurance rates will be accurately and fairly determined.

Insurance rates are not the only concern that the retail industry or any other industry faces when considering terrorism and workplace violence. Recent research suggests that 95 percent of employers are either completely unprepared or seriously under-prepared to handle a major crisis of any type. Discussion of this under-preparedness and what can be done to improve your organization’s crisis management plan will be the subject of an article in the near future. Stay tuned.

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