Areas with political troubles are labelled as blackspots for insurers. Ana Paula Nacif looks at the costs facing non-governmental agencies as they travel to conflict zones around the world
Non-Governmental organisations go into the most inhospitable countries on the planet in an attempt to bring about change and help soothe the devastating consequences of man-made catastrophes. Yet, unlike private companies, which can pull out at the first sign of disturbance, these not-for-profit groups working in war zones do not have that option because their raison d'etre is exactly that - to help people under the most extreme circumstances.
The past decade has seen this type of organisation become more sophisticated, some of them running massive complex multinational operations. Their insurance needs have developed accordingly. The risks they face are endless, including property damage, employers' liability, kidnap and ransom, terrorist attacks, malicious acts and war.
This is a growing market for insurers, albeit a risky and unstable one.
Premiums have gone up during the past few years and, although NGOs are able to place their risks with specialised providers, some organisations struggle to find adequate cover at a price they can afford.
Most of the risks are placed at Lloyd's, usually with the help of a broker that can source specific covers from a specialist underwriter.
Steve Robinson, executive director of Special Contingency Risks, explains that demand for these insurances is going up because of NGOs' growing presence in hostile environments. The media hype about high-profile incidents, especially those involving aid workers, has also helped to raise awareness about the challenges facing these organisations.
"The continued instability has been highlighted by the media attention surrounding the abduction of aid workers and frequent terrorist attacks," says Mr Robinson. "The nature of their activities often places them in highly exposed areas and they become attractive targets for groups wishing to highlight their political cause, as well as extract ransom payments."
Not so long ago NGO workers could wander freely, even in the most hostile environments, without fear of retaliation but this is no longer the case - a fact of which insurers, risk managers and NGOs are painfully aware.
"There is a heightened awareness of terrorism. These agencies were previously seen as non-target organisations that were there to help but in recent times they have become targets themselves," points out Martin Oddy, accident and health underwriter at Ace.
Tim Morris, finance director at Care International UK, an aid organisation, agrees: "We may think of ourselves as being neutral but the perception is that we are to some extent a Western-based organisation, which may not be perceived as neutral by some governments and local activists. We don't have the 'untouchable' status we used to have 10 or 15 years ago."
Mike Penrose, regional security and operations adviser of International SOS, which offers medical and security evacuation services, emphasises that one of the major challenges facing NGOs is the fact they cannot rely on any security that may compromise their neutrality.
"NGOs are changing dramatically - they are becoming an industry. To fulfil their mandates, they need to be in places where other companies would not consider going into. They cannot be seen as being involved with any party in the conflict. So, for example, whereas we saw some companies in Iraq turning to the military for protection, these organisations cannot do that."
There is enough capacity in the market to cater for the needs of these organisations but their peace of mind can come with a hefty price tag.
With large scale commodities, such as food, machinery and medicine, most insurance contracts will cover the goods only up to the point of embarkation, where the goods are unloaded, because of the risk of local hijacks.
Countries such as Afghanistan, Chechnya, Iraq, Israel and the occupied territories, Saudi Arabia and Yemen are on most insurers' black lists, and organisations looking to buy cover in any of these regions have to pay a premium price. "A personal accident cover for three people working in Basra can cost £10,000 for a short period of two months but I had quotes as high as £15,000," reports Fraser Newton, director of AKE Special Risks.
Mr Oddy adds: "We insure people in any circumstance but what the situation does is to increase premiums. Rates have increased recently. Because these people go in to very hostile parts of the world, they also need to have security and risk management in place - which we take into account in our premiums."
Despite the risks and instability, Mr Oddy believes it is a good market for insurers to be in, with an acceptable spread of risk. "There are not enough insurers involved in this market. These organisations have people all over the place and, while you have hotspots, they could be in 50 other locations where everything is OK."
The high volume of business - at a high price - that is coming into the market means that those who are prepared to stick it out may not have many reasons to complain. "This type of insurance is not new but the volume is now much greater," says Mr Newton. "A broker I know recently placed £30m worth of business. Of course, that included personal accident insurance but also the liability and health side of things as well."
Risks of up to £100,000 per person are usually taken by a sole underwriter, whereas values above that are typically shared between two or more parties.
"However, some of the big boys are able to write risks up to £1m," adds Mr Newton.
Mr Morris confirms that premiums have gone up significantly. "This year our broker worked hard to get us the cover we needed and we hardly had any choice of providers. Our travel policy excludes Afghanistan, Chechnya, Iraq, Israel and the occupied territories, Saudi Arabia and Yemen. However, we understand insurers also have a job to do - they need to ensure the return to their shareholders and can't afford losses.
"A key issue for me is that I couldn't live with myself if I had an underinsured risk. On the other hand, because premiums are going up, the costs of doing business are increasing all the time and the knock down effect is that less money is getting through to the people we need to help."
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