Could Middle East war spark attacks on Canadian soil?

Tensions across the Middle East continue – with fighting dragging on in Lebanon even as a U.S. ceasefire with Iran appears to be holding.

Such tensions can spark violence far beyond the conflict zone, as evinced by recent attacks and threats against both the Islamic and Jewish communities and their institutions in Canada and elsewhere.

Which sadly begs the question, could more serious and possibly deadly attacks take place on Canadian soil?

“You definitely see those tensions exacerbated, and you find individuals who are taking up an extremist ideology, whether that’s Islamist, antisemitic extremism, or right wing-extremism. We have also seen attacks against mosques in Canada in the past,” says James Lloyd, a senior vice president specializing in political violence and terrorism at Marsh Risk.

He cites the Montreal synagogue firebombing and Toronto school shooting in the wake of the Israel-Hamas war as examples of such incidents. And, in 2021, there was a truck ramming attack on a Muslim family in London, Ont. that claimed four lives.

“In terms…of insurance coverage, for an incident to be deemed as a terrorism attack, there has to be a religious, political [or] ideological motive established,” he says. “In most of these cases that we reference, there’s a clear religious connotation to the motive behind those attacks. But they do tend to be low-capability, often lone-wolf actors, which results in limited damage to actual physical property.”

For attacks occurring outside the Middle East region, he adds, “the impact is more to cause mass disruption and fear, and unfortunately human life casualties and injuries.”

Related: How the Iran war affects insurance coverage for terrorism

Like Lloyd, Marcos Alvarez, managing director of global financial institution ratings at Morningstar DBRS, says the more plausible spillovers for Canada are diffuse, smaller-scale and less predictable actions like cyber activity, threats against soft targets, vandalism or politically motivated attacks on community and religious institutions.

Other potential loss risks stem from protest-related property damage and precautionary closures in the face of threats.

“That is consistent with Canada’s current terrorism threat level of Medium – which has not changed for some time – and [the Canadian Security Intelligence Services’] statement that violent extremism remained at a heightened level, and the Canadian Centre for Cyber Security’s assessment that Canada is very unlikely to be a priority Iranian cyber target but could still be a collateral victim of activity aimed at the U.S.,” he adds.

Both Lloyd and Tarique Nageer, terrorism placement advisor at Marsh Risk, note that within the suite of terrorism and political violence insurance products, there is active assailant coverage. It’s designed to respond to events that might cause limited physical damage but will impact business and civil order – often shutting down part of a town or city where an attack occurs.

“But then also the human impact in terms of additional expenses that might be incurred for funeral costs, expenses like additional security costs that insureds find themselves having to take out following an incident,” says Lloyd.

Related: Where Middle East war creates risks for Canada

The coverage pays for organizations or municipalities to engage a crisis management response team to help people cope with these incidents. Coverages can also facilitate the hiring of a family or press liaison if needed. “I’ve seen that product be very useful for insureds,” he adds.

In Canada, Lloyd says, the Tumbler Ridge school shooting in February has led to client interest in this insurance product area.

Nageer adds it’s also important for businesses or governments to be prepared with security and business continuity procedures that can respond to terror threats.

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“Insurance is important. But does that completely take away the risk?” he asks. “Knowing what those risks are, and making sure you have the right training and contingency plans in place in place for your employees may override any of the insurance aspects.”

Looking specifically at the aviation segment, Alvarez tells CU, “Transport Canada already advises Canadian airlines not to fly over Iran or Lebanon and imposes restrictions or heightened risk assessment for Iraq and Israel, so the aviation system is already operating with conflict-zone controls.”

He adds the credit rating agency’s base case for Canada does not include the potential for a 9-11 style loss emerging from the current conflict.

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.