December 13th, 2012

Identifying New and Emerging Risks

Posted at 1:00 AM ET

David Flandro, Global Head of Business Intelligence, Julian Alovisi, Assistant Vice President, Lucy Dalimonte, Senior Vice President, Ellen Rieder, Managing Director and Emma Karhan, Senior Vice President
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By utilizing such information, (re)insurers have improved their awareness of the threat posed by terrorists. Although there are significant challenges when attempting to predict and react to events, companies continue to seek to identify new risks as they arise.

Cyber Risk

The emergence of cyber risk is an increasing concern for governments and organizations around the world. Indeed, the Central Intelligence Agency has described cyber terrorism as the battleground for the future. This has prompted warnings that any successful attack on critical infrastructure, such as military installations, financial markets, aviation control centers, water systems and power supplies, could have devastating consequences.

Arab Spring

Other emerging risks are less apparent, however. As demonstrated by recent developments in the Middle East and North Africa, events have the potential to develop quickly and spiral out of control. The relatively new dimension of social media has exacerbated the situation. Not only has it aided extremists in recruiting new members and given them a vehicle to communicate directly with followers, it has also played a prominent role in fueling the protests and unrest that were spawned by the Arab Spring movement.

The wave of Arab Spring demonstrations that swept across several countries in the Middle East and North Africa over the last two years has resulted in a change of government in Tunisia, Egypt, Yemen and Libya and an ongoing civil war in Syria. The turmoil has also emphasized the importance of understanding the different coverages that exist in the (re)insurance market and the need for adequate terrorism and political violence protection.

The Arab Spring movement originally unleashed a surge of peaceful protests across Tunisia in early 2011 that culminated in the ousting of President Zine El Abidine Ben Ali. Following the uprising in Tunisia, sustained protests in Egypt also forced President Hosni Mubarak to resign.

Peaceful protests, however, have since given way to violence in the region, with regimes in Bahrain, Libya, Syria and Yemen deploying troops. Civil war broke out in Libya as Colonel Muammar Gaddafi used force to repel anti-government protests. After months of near-stalemate, rebels advanced into the Libyan capital of Tripoli in August 2011 (aided by NATO air strikes), overthrowing Colonel Gaddafi and setting up a transitional government. Colonel Gaddafi was subsequently killed by rebel forces, and elections for a General National Congress were held in July 2012.

Despite some political progress, Libya remains deeply unstable and vulnerable to the presence of extremist groups looking to exploit the situation. On September 11, 2012, the U.S. Ambassador to Libya, Chris Stevens, and three other U.S. officials were killed in an attack on the U.S. consulate. Although the attacks were initially blamed on an angry mob protesting against a film seen as offensive to Islam, intelligence officials now believe the attack was carried out by 60 to 70 local militants with ties to al-Qaeda affiliates. Intelligence officials believe U.S. and Western interests in Libya are likely to remain at risk for the foreseeable future.

Civil War in Syria

There are also concerns that radical Islamic militants are attempting to exploit the ongoing civil war in Syria to gain support in the country and use the unrest to provoke a cross-broader sectarian conflict in the region. Intelligence officials said radical Islamic militants moved into Syria after Ayman al-Zawahiri (al-Qaeda’s leader) pledged support for the insurgency against the Bashar Assad regime in February 2012. Al-Zawahiri reiterated his call for fighters to converge on Syria in September 2012, raising concerns extremist groups will exploit religious tensions to establish a strong foothold in the country. Their aims could be extended beyond the borders of Syria and into neighboring countries such as Lebanon in an attempt to cause a regional sectarian conflict. There are fears Syria could become a training ground for terrorists like Afghanistan and Iraq. There is also growing concern that an escalation of the conflict could led to Western intervention.

The involvement of extremist militias in Syria is an added dimension to an already complex and protracted conflict. Although the aims of the extremists are still a long way from being achieved and officials are quick to point out that there is only a relatively small number of al-Qaeda fighters in the country, there are concerns these groups may gain influence and size if the situation deteriorates.

Implications on International Terrorism

What does all this mean for international terrorism? Certainly, the unrest in Syria and elsewhere in the region raises important questions about the future of the international terrorist threat. The uncertainty and power vacuum created in some countries as a result of the Arab Spring has produced significant opportunities for extremists groups and governments that sponsor terrorism. As described above, there are fears these groups will attempt to exploit the political instability that exists across the region. There is also concern that the recent violence in Libya, Syria and Yemen particularly could offer militants an opportunity to strengthen their presence in the region and, should government control weaken sufficiently, pursue their goal of acquiring chemical and radiological weapons. Finally, many grievances used by extremists to recruit militants (such as the conflict in Afghanistan and the Palestinian situation) remain unresolved. Until such issues are settled, analysts believe al-Qaeda’s ideology will continue to galvanize extremist groups and individuals around the world.

The long-term implications of the Arab Spring will very much depend on what type of political structure is established in the Middle East and North Africa. While the West hopes to see reforms that promote democracy, al-Qaeda has long advocated a political system based on its interpretation of Islamic law. Whatever the outcome, it is likely that al-Qaeda-affiliated groups will remain a global security threat for some time to come.

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