Israel – learning to adapt to constant security threats: a role model for sound risk management?
For firms operating in Israel, the complex political landscape has always been a business risk. As such, successive governments have put in place robust frameworks for protecting businesses, citizens, and Israel’s vital economic assets. Operating in a region that has historically been volatile, the business community and citizens have become adept at preparing for civil unrest and security threats.
Kennedys undertook consumer research exploring the global political landscape in May 2021 in 12 countries across the world including Israel. This research was conducted at the height of the most recent conflicts in the Gaza Strip. Not surprisingly, Israeli respondents were the most likely globally to cite terrorism as having a major impact on their daily lives and their communities.
Because of the complex security situation in Israel, the country has been forced to invest in building its resilience. For example, most businesses and homes have either shelters or security rooms, which allows work to be performed as usual. Sirens operate whenever there is the risk of a missile landing in the area. For this reason, Israel enjoys economic success despite the geo-political challenges it faces. When the terror threat is high, as it was in May, home working and home schooling are necessary. The country cannot afford to close the economy whenever there is an extreme security event so they have found ways to continue with everyday business.
This complex security environment has involved developing a pooled approach between the state, insurers, and corporates with the cost of compensation for war and terrorism being shared. Other countries now finding themselves having to respond to increased terror related incidents could learn important lessons from Israel’s example.
Globally, most insurance policies exclude war and terrorism under their policy clauses, so any terrorist event would be excluded for insurance purposes. However, corporates can purchase a specific extension to their policies to protect themselves against war and terrorism, but this is not commonplace. To ensure a minimum level of protection is in place, the Israeli Government created a compensation fund in 1941 under the Property Tax Act to cover damages arising from war. This was later extended to cover terrorism. This offers unlimited coverage for property damage, but it does not cover loss of earnings or profits. This model also covers assets outside Israel including marine insurance with the state of Israel bearing responsibility for direct damages up to US$100 million.
Israel’s inbuilt resilience and agility has helped the country to become more adaptable when dealing with other crises.
When the global COVID-19 pandemic struck in 2020, the country was already prepared to switch instantly to remote lifestyles. The country adopted one of the most effective vaccination programmes in the world. Israel was one of the first countries to implement a large-scale vaccine role out on 20 December 2020. By early February 2021, a third of Israelis had received both doses of the vaccine. Israel was among the first countries to lift all social distancing restrictions. In addition to this, in July 2021, Israel became the first country to begin offering a third dose of Covid vaccines to people aged over 60, a move which has prevented further lockdown measures and damage to the economy.
Likewise, the country has taken steps to address key climate-related risks. The country’s highly successful agricultural sector is extremely reliant on scarce water resources. A decade ago, the talk was of importing water from countries such as Turkey. But investments in new desalination facilities have transformed the situation, so limiting future physical climate risks, and security threats, facing the country. There has been a general push in Israel to be seen as a world leader on climate change and green technologies and we can expect to see the new government pursue that policy further. Israeli’s resilience and agility is certainly a model to learn from.
Geopolitical outlook: Kennedys' business risk barometer
Understanding the political direction of travel at a country level is increasingly significant for businesses operating across international borders. This report assesses the changing nature of risk and how redefined risk impacts business and their insurers.Find out more