Working in a ‘hot zone’? How’s your insurance?

Companies with footprints in the Middle East and North Africa are probably more interested in political risk and insurance than in the markets right now.

With Libya in chaos and  with tensions in Bahrain and Yemen escalating, it’s fair to say the region is chronically unstable, despite Egypt’s having returned to some semblance of normalcy.

These matters are pretty much everyday concerns for Aon Risk Solutions, the global risk management business of Aon Corporation, which advises companies how to assess political risk and cope with potential unrest.

Steyn McDowall, regional director of crisis management at Aon South Africa, says that companies that operate in high-risk countries need to put crisis management plans in place for any eventuality (the company considers natural disasters, terrorism and kidnap, too, and constantly monitors events on the ground in countries all over the globe).

Aon has a set of maps that tell some fascinating, if scary, stories. The Political Risk Map and Terrorism Threat Map allow you to weigh up the risk factors of setting up a business in a particular region or country (kidnapping as well as separatist and revolutionary activity falls under “terrorism”). South Africa, for example, has a medium-low risk, with factors like strikes, riots, civil commotion, terrorism and supply-chain disruption considered worth noting. Insurance rating guides for high-risk areas are also supplied.

Ultimately, companies have to be sure that they’re covered for losses, damage and, of course, potential harm to their staff. McDowall says many companies in North Africa approached Aon because they thought they had effective plans in place but subsequently found that, because so many companies were scrambling to implement plans, they didn’t all have resources to execute their plans effectively.

“Dealing with regime change, military coups or terrorist attacks is way outside the normal operating parameter of most South African firms. Companies operating in high-risk countries must make sure their scenario planning covers ‘worst-case’ modelling,” McDowall explains. “Even the best prepared company can run into trouble when they have to evacuate staff in a hurry – those who aren’t prepared at all really suffer.”

McDowall says it may costs “tens of thousands of US dollars” to evacuate staff via specially chartered aircraft – what usually happens is that, when crisis hits, airports close, and access to cheaper commercial flights becomes impossible. “Personally, I would have evacuated non-essential staff from Libya a long time before it was done,” he adds. “Prevention is better – and cheaper – than cure.”

What should companies and individuals be insured against?
McDowall says that companies can’t rely upon travel insurance and medical insurance alone.

“Many policies don’t cover political risk extraction per se, and the cover must be added by way of addition to a travel policy. Stand-alone policies tend to be very expensive if available,” he says. And companies should be sure that their extraction plans identify possible costs associated with extraction and that their insurance policies have an adequate limit to cover their staff. Cost will depend on staff complement, and may be weighted according to various risks (for example, just sending an aircraft to extract staff may put the entire aircraft’s crew at risk, so this is an additional risk factor).

Companies need to be sure that staff members are trained and don’t put themselves in harm’s way. “Safety comes down to lots of small decisions, and often these decisions are arrived at based on individual experience – or a lack thereof,” says McDowall.

It may be common sense to avoid a riot or any kind of gathering, but make sure, too, that curfews are observed. If you know what the particular risks are in a given country, you’re much better equipped to avoid them. If you’re an employee working in a region where “flashpoints” may develop, make sure your life insurance is comprehensive and you’re aware of which exclusions apply to different countries. Don’t rely purely on travel and medical insurance because you may not be covered if, say, you’re shot or wounded in some way in a riot.

“Also, make sure you have all the appropriate inoculations,” says McDowall. “And be aware that, if you’re working in North Africa or the Middle East, the biggest threat – civil unrest aside – is motor-vehicle accidents. Will you be covered if you’re in an accident? Check with your insurer.”

What about South Africa?
Companies in South Africa are most likely to be affected by riots, civil unrest, strikes and lockouts. Locally, Sasria offers short-term insurance for special risks, such as acts of violence occurring during strikes, riots and so on. It may be that your insurance policy already has Sasria cover – check to be sure.

* If you’re a frequent business traveller and you’re concerned about your safety, have a look at Aon’s WorldAware mobile application, currently available for iPhone, iPad, Android (BlackBerry will follow shortly). The platform lets you know what your risks are in terms of street crime, serious crime, terrorism, kidnapping, civil unrest, regime instability, armed conflict and even state corruptibility! The app can also track your location with GPS and give you directions to your nearest embassy. Visit: http://www.aon.com/worldaware/index.jsp.

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