Noordin Mohd Top, provocateur in Terrorism Insurance….

The masterful bomber and artful dodger who escaped many attempts to capture him is finally dead! Noordin Top is a Malaysian and his presence in Indonesia helped raise the splinter group of the Jemaah Islamiah (JI) which handed numerous bombings around Bali and Jakarta. It also helped to spice up the Malaysian anti-sentiment among the Indonesian! But his death may raise the mantle of martyrdom that he had proclaimed he would acquire…. He may even be a better recruiter of foot soldiers in death than he was in life!


Bombing, the Art of Terrorism?

The past many years of bombings around the South East Asia region, especially the 2002 and 2005 Bali’s bombings…… had raise the profile of militants and their terrorism activities… Abu Sayyaf and MILF also raise militants profiles in Southern Philippines, so did the terrorism occurrences in Southern Thailand. All developments since the formation of JI in the early 1990s contributed to increasing concerns among business owners, especially those having dealings or having close relationship with US and Europe in the earlier part of this 21st century. But this concerns tapered down a fair bit. However in recent times, concerns are back again…. in the face of fresh bombing of Ritz-Carlton and nearby JW Merriot Hotel in downtown Jakarta.

Demand for Terrorism Insurance in South East Asia

Although the demand for Terrorism Insurance goes up and down but in recent times with the much reduction in rating and improved terms of coverage, many business owners are now increasing the take up rate for a sleep easy cover! The available capacity has grown since the 9/11 days to USD2.8 billion and Gross Premiums hitting USD750 million worldwide as recorded in late 2008.

What are the technicalities in this “sleep easy” cover of Terrorism Insurance?

The terrorism coverage is of  independent standalone capacity. It is important to note the various terms of reference outline (for a proper understanding of the subject) below:

  1. The standard Terrorism policy form is called “T3”, covers Physical Loss or Damage resulting from an act of terrorism as a base policy wording. This wording can be tailor made and amended for individual needs, and exclusions can be addressed if a particular exposure exists. (The policy is normally referred as Sabotage & Terrorism (“S&T) internationally).
  2. Coverage can also be purchased for Business Interruption resulting from an act of Terrorism causing Physical Damage called “T3a”. We must bear in mind that “T3” must be purchased and no claim shall be paid for BI unless a claim has been paid (or will be paid) under the “T3” property damage coverage.
  3. There are a number of “buy-backs” which can be added to the T3 and T3a wordings to broaden coverage, all for an additional premium.
  4. Important definitions and subject matters’ outlines:
Subject matters Outlines and Definitions
Covers Physical Loss or Damage resulting from:
  • An act of Terrorism
  • Malicious Damage
  • Sabotage
An act of Terrorism: An act (including the use of force or violence) by a person or group committed for political, religious or ideological purposes with the primary intention to influence any government. They may be either acting alone or in connection with any organization.
Malicious Damage: All physical loss or physical damage resulting directly from a malicious act caused by anyone. This act does not need to be committed during a disturbance of the public peace, and shall include loss caused by Sabotage and acts committed by any people who are members of an organization whose aim is to over-throw any legal or de facto Government by terrorism or violence.
Sabotage: The act of deliberate subversion that causes damage or destruction of assets, either incidental or arising out of an Act of Terrorism or Malicious Damage.
Some Extension Cover to T3
T3a Business Interruption as result of loss or damages to the physical properties insured
LPO 437: Strikes, Riots and Civil Commotion
Political Violence
Including Terrorism, Sabotage, Strikes Riots and Civil Commotion, Malicious Damage, Insurrection, Revolution, Rebellion, Mutiny and Coup d’Etat, War and Civil War. Capacity specifically available for Political Violence cover is 250 – 300 million.

S&T are dominantly placed within the Lloyd’s markets like, Catlin, Hiscox, QBE/Limit, Beazley, Amlin and Talbot. Treaty reinsurance is still not freely available, much transactions are being done on facultative basis. Risks today are much politically motivated, a result of regional Islamic militants’ uprising…with modus operandi on sudden multiple coordinated attacks.

The aspects of Pricing and Perspectives of Underwriting…..

The Early Days
  • Probabilistic approach notably not practical
  • Players were required to generate enough Premium to pay for a major event
  • They had very little spread but high rates
  • Only a few brave players
2008 Market
  • Rates much lower with no major losses and more players joining in….
  • More spread of risk
  • Big accumulations – especially in locations within NYC, Toronto etc.
  • 7 years of benign history has attracted new markets
Days Ahead…
  • Underwriters want to write risks where the perception is bad, but the reality is much better
  • Knowledge of regional development is key, especially if risk is internationally linked to the US and Europe…
  • 99% of risks underwritten is driven by pricing – Malaysia S&T demand is still low therefore rates continue to be soft….
  • Demands predominantly seen in mega-Construction risks, Iconic buildings, Airports, Industrial, Power – oil and gas, Infrastructure and Telecoms
  • Additional coverage (ie. LPO 437 and Political violent) in addition to T3 and T3a may requires additional of 10% of basic T3 premium.
What event do Underwriters model and how do they think?
  • Aircraft impact
  • Suicide ‘vest bomber’
  • VBIED – Vehicle Borne Improvised Explosive Device
    • Proven and reliable
    • Materials readily available
    • Very destructive – Marriott Islamabad
    • Up to 80% as powerful as military HE
Quantity of Explosives – 600 kg of RDX and TNT (Torpex or H6) plus mixture of mortar and ammunition to increase explosive capacity and Aluminium powder to further increase this.

Marriot Islamabad Explosion: Quantity of Explosives in VBEID attack – 600 kg of RDX and TNT (Torpex or H6) plus mixture of mortar and ammunition to increase explosive capacity and Aluminium powder to further increase this.

The Explosives used are considered medium

The Marriot - Aftermath of explosion: The Explosives used are considered medium sized VBIED but the damages were substantial.

  • Model by “blast zone” – Generally each Bomb blast is limited to 250 meters radiusPicture2
  • No PML factor – assume 100% loss to property and business interruption in blast zone
  • Monitor city and country exposures
Wider BI wordings have complicated
  • ‘Interdependency’ between locations
  • Supplier and Customer extensions
  • Ingress and Egress
  • Unlimited Extra Expense
  • Broad acquisition clauses
Other Stand-alone Product involving Terrorism events
  • Event Cancellation
  • Terrorism Third Party Legal Liability
  • Terrorism Employers’ Legal Liability
  • Terrorism plus SRCC and ‘War on Land’
  • Stand-alone (Nuclear, Chemical, Biological) NCB terrorism

The future in demand for Terrorism Cover

Why is the government show so much interest in assisting the family to bring back his body to this country?

Why is the government showing so much interest in assisting the family to bring back his body to this country? The government should not be involved as this would create a perception of martyrdome in that fella!

As mentioned earlier, the death of Nordin Mat Top and the more or less successful suppression of terrorist activities within this region do not in reality spell the end or reduction in demand…. his death may spell new waves of attack, which may not be happening in Indonesia but in other parts of this region. These peoples are just too unassuming, too much or perhaps too little putting fear into society across each and every nation!

The likely target for terrorists has also changed and continues to change with the private sector being even more exposed than in the past when targets were more likely to be government or military facilities. So far in 2008 Government and military facilities account for less than 35% of total incidents with the remaining 65% of incidents targeted at the private sector.

Do follow us as we work towards disclosing the strategies towards the nextgen insurance eCommerce platform

With exposure to the private sector growing and premiums reducing, now is the time to make sure you and your clients buy terrorism cover and are not left exposed. 👿

Countries having more than 1 terrorist attack illustrated attacks are very unassuming:

Country 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total
Myanmar 0 0 0 0 0 1 0 0 2 3
Thailand 0 0 0 0 1 10 1 1 2 15
Philippines 1 1 2 1 2 0 1 4 2 14
Indonesia 1 0 1 0 1 1 0 0 2 6

(Part of the contents are extraction from UIB Asia’s Market Seminar – Cebu 2009’s presentation on Terrorism Insurance)

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5 comments for “Noordin Mohd Top, provocateur in Terrorism Insurance….

  1. Teoh
    October 6, 2011 at 09:08

    T3 plus LPO437, Is this wording equivalent with the current version of LMA3092?
    Aside from this, would like to know more about the extension for S&T insurance mentioned in your articles especially Broad Acquisition Clause, Ingress & Egress.. What does it cover? Are they general extensions granted?
    And what about the variations of S&T insurance- Terrorism Third Party Legal Liability? Generally, what type of business would go and purchase this standlone S&T liablity policy? Aviation only? And who in the market is writing this class of insurance?

  2. CJ
    October 3, 2009 at 00:02

    Someone told me that Noordin’s asshole is like a funnel, which means his asshole is too opened. He is or already a was GAY! Someone screwed his backside! Wow! this is something I did not know. But this informant told me he may not be gay after all! But he had been hiding too many bombs in his asshole, thus reasons like a silo or a funnel! Well, he is dead now, only Hishammudin felt he can be rehabilitated, do know why he said that?

  3. September 30, 2009 at 13:41

    The latest that we’ve got is that T3/T3a are old London market terrorism wordings. LMA 3030/5039 is the updated and latest wordings of the T3/T3a. Anyway coverage is the same but “sabotage” is much better defined for the benefit of the client. Today London markets are still using the T3 and T3a….although the policy wordings in the policy documents would be LMA.

    • Kent
      December 14, 2009 at 08:40

      SInce there is a change to newer wordings – LMA 3030/5039, which is very much allien to us Malaysian underwriters and customers, do keep your readers posted with more writeup. TQ

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