Terrorism Insurance Considerations
When it comes to insuring against loss from a terrorist attack what do you need to consider?
Is the best option to insure with Pool Re or with an insurer at Lloyds? What are some of the major exclusions and requirements of terrorism insurance you need to be aware of? This article considers some of the issues surrounding terrorism insurance.
An interesting video was recently released by Insurance News in which their editor interviewed Julian Enoizi, CEO of Pool Re, the Government-backed terrorism insurer.
Among other things, the two discussed the change in the type of terrorist attacks we are seeing today. Previous attacks by the IRA and Islamist terrorists have focused on causing damage to infrastructure and the economy. This is in stark contrast to recent attacks which sadly have primarily focused on taking as many lives as possible, with little interest in damaging property.
As the type of terrorism changes over time, the cover offered by an insurer must also evolve. Currently many insurance policies covering terrorism are not suitable for the type of attacks seen across Europe in the last few years.
Charities and businesses covered by Pool Re (via their own insurer) have a requirement on their policies that any incident must be classed as terrorism by HM Government before a claim will be paid. This can take time; 23 days in the case of the London Bridge attack in June 2017.
Currently the cover offered by Pool Re is limited to claims for losses arising from material damage at the insured premises. This causes a serious problem for charities and business owners when income is lost because of road closures (which don’t meet the requirement for ‘arising from material damage’) and the claim is rejected. One restaurant found themselves in this position following the Borough Market attack, losing £50,000 because of a road closure. As this wasn’t due to ‘material damage’ to premises the claim was declined.
Fortunately Pool Re is not the only option when it comes to insuring against acts of terrorism. Insurers at Lloyds offer terrorism insurance which includes cover for business interruption claims (loss of income) for non-damage denial of access and does not have a requirement for the incident to be officially classified as terrorism before a claim can be paid.
Another business which suffered as a result of the attack on Borough Market was insured with a Lloyds Underwriter. Their loss of £150,000 including a claim for lost trade (due to non-damage denial of access) was paid without delay.
It is important to note that Pool Re is currently the only insurer offering cover for damage caused by nuclear terrorism. Biological terrorism is also covered by Pool Re while some other insurers are able to offer limited cover for this risk.
With an increase in cyber attacks and the ability of hackers to cause physical damage using a cyber trigger, questions need to be asked as to whether terrorism policies will cover these type of claims. Julian Enoizi has said Pool Re are looking to evolve their coverage to take this new threat into account.
There is also a question over how motor insurers will respond in the cover they are offering. Some insurers have unwittingly covered incidents under their policies where an insured vehicle is used as a weapon.
Terrorism is an ever-evolving threat. The insurance industry needs to ensure it provides cover which will protect charities and businesses from the risks they face today. For more information or advice on how to insure your organisation against terrorism risk, contact us today.