Our latest blog by William Wakeham (Ardonagh Group) explores how NGO security managers can navigate the daunting landscape of insurance coverage for humanitarian organisations operating in crisis-affected environments and examines the challenges that arise in the context of the conflict in Ukraine.
Insurance is a mechanism for transferring risk. Part of the feasibility study for any project should address all identifiable risks and allocate these into acceptable, transferable, and unacceptable.
By taking out an insurance policy, we deal with the financial risks you wish to transfer from your balance sheet. Even these should each be quantified first – how much are you prepared to self-insure? You can then transfer this balance to a credible financial institution for reimbursement in the event of a ‘worst case scenario’.
The Insurance Landscape
When buying insurance, brokers are the intermediaries you would work with. Their job is to understand your needs fully and scour the marketplace to find the coverage most suitable for you at terms you can accept. Finding credible providers and a policy that will respond to your needs when required can be a challenge for NGOs.
Insurance companies are risk-bearing entities and, therefore, could provide coverage to you directly. However, it is worth noting that complex coverages or war/terrorism-related coverages all come back to the London market, so you are usually best served by engaging a broker to find these coverages rather than talking to the local market. Your main requirements are the strength of the cover and correct terms, including war and terrorism.
Where Ukraine differs from other war-torn countries (such as Iraq, Libya, Afghanistan, Somalia, and DRC)
In some ways, Ukraine is a much easier territory for insurance provision. It is expensive, yes, but it is not an insurgency and much more of a traditional war with a front line. Therefore, the rates you pay for your insurance are directly proportional to how close you are geographically to the front line, critical infrastructure, or the Ukrainian military.
Medevac poses specific challenges when purchasing insurance. Local medical facilities usually will not accept foreigners or civilians. International medevac provisions are, at most, on a best-effort basis. Distances are long, and there is a shortage of ambulances.
Nuclear, Chemical, and Biological exposures have been a concern for many organisations. We can provide coverage if requested, but this will add cost. Some organisations have taken the view to exclude this coverage because if exposed to it, they face a doomsday scenario anyway.
Also, markets have tightened up significantly on who they are covering. Providers must now conduct due diligence on each individual, which is extremely time-consuming. Thinking about your insurance needs well in advance can avoid these delays.
Property is a significant challenge in Ukraine. Property and War/Terrorism Underwriters currently do not provide terms in Ukraine, leaving organisations without credible options to insure their buildings, offices, or equipment.
Three major questions to ask when buying insurance:
- What is the financial strength of the ultimate insurer (and, therefore, will they be able to pay claims)? The (S&P or AM Best ) financial rating is a good guide.
- Do they understand your needs? For example, including war/terrorism cover can add cost, but in certain territories is vital.
- Has someone done their due diligence on the named responders on the policy? Can they operate where, and in the fashion, they claim?
Common themes when purchasing insurance in war zones/higher-risk territories:
- Rates are usually much higher.
- Situations are fluid and can change quickly.
- Never do anything you haven’t told your insurers in advance – this could invalidate your cover.
- Check your exclusions! War and terrorism are the most common exclusion, but others can relate to your activities, locations, or behaviour patterns.
- Communicate with your insurers in good time. You cannot just buy insurance in a few hours in these complex environments.
General Best Practice Ideas
- Formulate a plan which involves security, HR, project management, and your insurance broker. Decide which risks you can accept and which you wish to transfer to the insurer. Then, quantify the transfer amounts.
- Go through the plan in detail once it is formulated to ensure there are no gaps.
- Use your broker to obtain terms but then interrogate them for the providers’ security, experience, past performance (claims paid), the experience of the third-party providers etc.
- Incept the plan clearly and without leaving any gaps (dates or types of cover).
- Don’t deviate from the activities which you have declared. If you need to change the plan, tell your insurers first!
- Test the claims response numbers and always be prepared for the worst-case scenario.
The Way Ahead
Rates are very high. We are constantly working to reduce these as best we can. This has not been easy but relies on a strong flow of information from within Ukraine. We regularly visit to provide feedback to our markets. Otherwise, I am afraid that things are not likely to improve until the situation does.
I have provided a checklist document which we would advise all GISF members to read and consider before and during their insurance purchase. This document results from many years of experience working in frontier territories. Members can access the document here.
Please feel free to contact me should you need to know any more. I am on William.firstname.lastname@example.org
About the Author
William is a Divisional Director in the International Division of Price Forbes, within Ardonagh Group. With over 9000 employees and income of £1.2 Billion, Ardonagh are the largest independent insurance brokers in the London market.
William has spent the past 20 years working in frontier and emerging markets. He spent ten of these building an insurance broking company and a medevac business in Iraq. He has worked on the ground, providing insurance, in Iraq, Afghanistan, Libya, Somalia, South Sudan, the Democratic Republic of Congo, Mozambique, Egypt, Guyana and most recently, Ukraine. His work in Ukraine has been ground-breaking due to his ability to negotiate rating structures with Underwriters and to conduct due diligence on service providers such as medevac and kidnap responders. William’s career has involved providing insurance solutions for Humanitarian, Security and Commercial organisations in some of the world’s most hostile territories. Solutions driven, he is a firm believer in resolving seemingly unresolvable problems through hard work and acute attention to detail.
Educated at Shrewsbury School, The Royal Military Academy Sandhurst and the University of Westminster, William is an insatiable traveller. A former British Army officer, William has two teenage children and enjoys running, walking and is a keen horseman. He is a passionate advocate of Combat Stress and Children’s charities relating to conflict zones.
Image Credit: OCHA/Saviano Abreu
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