Armed to face global risks

Nato is in the insurance business. Like Lloyd’s, we spend a lot of time assessing global risks – political, military, even environmental.

We invest heavily in diminishing risk, for allies but also for our global partners. And, as with Lloyd’s, when disaster does strike, somewhere in the world, often the first call is made to Nato to deal with the consequences.

Also like Lloyd’s, most people in the world know our name.

Unfortunately, not as many really have any idea of what we do in the Atlantic alliance these days. I’m glad to have the opportunity to explain, not just what Nato does today, but what more I think Nato can do together with the insurance industry – because we have more in common than you might think.

Let’s use the City as an example of what I mean. The City of London is one of the greatest instruments of wealth creation in human history.

I believe the 335,000 people working here create almost 9% of the GDP of the UK. But the City’s future prosperity, and continued ability to stimulate investment worldwide, rests on some critical foundations: stability, predictability and transparency, not just here in the UK, but in the international environment more broadly.

Globalised world

It is a cliché to say that we live in a globalised world. No one lives that more than the people working in the City.

It is equally a cliché to say that there is a dark side to globalisation: increased vulnerability to problems that seem far away on the map, but hit home in our backyards.

Those of you feeling the effects of the US sub-prime mortgage problems know that the ripples are being felt in every part of the markets, and in every part of the world.

The 11 September attacks, six years ago, were another clear example. Three buildings were hit in the US.Beyond the tragedy of the lives lost, what were the costs?I saw one assessment for the US alone which looked at property damage, lost production of goods and services, and the loss of stock market wealth, and put the price tag at two trillion dollars.

Again, for the US alone. And that doesn’t include the costs to the global airline and tourism industries, the investments in security infrastructure, and so on.

Managing that dark side of global-isation is becoming harder every day – whether you are a City fund manager, a Lloyd’s underwriter, and certainly if you are the Secretary General of Nato.

It was a lot simpler when I was a young second secretary at Nato in the 1970s – one opponent, one clear threat, a clear plan to follow to defend ourselves.

Today, the threats have mutated in ways that are difficult to predict and even more difficult to manage. They have gone from visible to invisible.

Localised risks

Terrorism is the most obvious example. From localised risks, they have become global dangers that respect no borders.

Look at Afghanistan. Until 2001, it seemed to many of us to be farther away than the other side of the world. It was the classic “faraway place about which we knew little”, to paraphrase a former UK prime minister.

But the cancer growing there, in the shadows, metastasised into a terror organisation that planned in Germany, trained in Africa, and struck in the US, and has struck around the world since.

I could also mention the proliferation of weapons of mass destruction. AQ Khan, in Pakistan, was like a nuclear Tesco with a home delivery service. By the time he was stopped, nuclear technology was in hands that should not have it, most obviously North Korea.

The range of threats has also expanded, from classic military challenges to new ones. Cyber attacks can take out a power grid, a banking system, and government services.

While the attacks take place in cyber-space, the effects are very real. And while they are not military in the traditional sense, they have a clear security dimension, along with – and linked to – their economic impact.

Most companies have taken steps to adapt to this new world. Almost every company has beefed up its IT defences. Business continuity planning – what to do in case we lose access to what we need every day to work – is now essential.

“Today, threats have mutated in ways that are difficult to
predict and even more difficult to manage. They have
gone from visible to invisible

Jaap de Hoop Scheffer

Needless to say, the insurance business has had to make major adjustments. I know that some companies even avoid certain hotels, or minimise air travel, to protect their staff from possible terrorist threats.

Nato, too, has transformed fundamentally to meet these new security challenges. Going into this new century, we had a rock-solid foundation: members that included some of the most influential countries in the world; half a century of commitment to one another’s defence; a forum for 24/7 political consultation between Europe and North America on security matters; and an unmatched ability to generate military power.

We have built on that foundation, first and foremost, by recognising that static defence is no defence at all anymore.

Of course, beefing up homeland security is essential, such as the intelligence services, police, border monitoring, and security cameras. But we also need sometimes to go to the problem before it comes to us.

Obviously, Afghanistan is the clearest example. There is no mystery about what will happen in Afghanistan if we do not succeed in helping the elected government to establish security in that country. The Taliban will be back. So will Al Qaeda.

And we know what that means for our security here at home – not to mention what it would mean for the Afghans.

Energy security

There are other new challenges with which we are just starting to come to grips in the alliance. One example is energy security. There are virtual pipelines of natural gas tankers across the high seas. Tokyo, for example,

needs one tanker every eight hours to keep the lights on. Those virtual pipelines are vulnerable.

Could Nato, with its maritime fleets, add value, in times of crisis, to protect them? Personally, I think so.

I also think Nato might play a role in protecting critical energy infrastructure when there is a specific, high level threat. Again, only where Nato can add value.

Maritime security, more generally, is an area where the alliance might have a greater role to play. I also mentioned cyber defence. In 2004, Nato set up a centre focused precisely on cyber defence. When Estonia was hit by cyber attacks, that Nato centre sent personnel to help.

As the military has had years of learning how to protect IT infrastructure, and because there is clearly an advantage to sharing best practices, I believe you will see more of a role for Nato in this area as well.

Missile defence

Let me mention, finally, missile defence. There is quite a debate underway across the Euro-Atlantic area about whether to build defences against possible missile attack; if so, how and where, and what role Nato might play.

We simply cannot afford not to have a discussion about missile defence – among allies, and with the Russians too. The Cold War is long over. We shouldn’t be hobbled by Cold War thinking when it comes to this issue.

In all these ways – through constant consultation between Europe and North America, pro-active military operations, and new defences against new threats, Nato is helping to maintain the stable, predictable international environment you need to do business.

Let your voices be heard, here in the UK, in support of your military, in support of defence spending, in support of Nato.

I firmly believe that these support you, every day, by creating a climate in which you can work effectively.

But they need your support too. With security, as with so many other things, you get what you pay for. It cannot be bought on the cheap.

A former UK prime minister once said: “I’m an optimist, but I carry an umbrella.” For many, many people, Lloyd’s is their umbrella.

In a sense, I see Nato, too, as an umbrella: for the people of this country, of all the 26 allies, and for the international community more broadly; one that we need more than ever, in this very challenging new century.

This is an edited version of a speech given by Jaap de Hoop Scheffer at Lloyd’s fifth City Dinner earlier this month. See www.lloyds.com for more information