The recent (at the time of writing) terrorist bomb attack on 15th September 2017 involving a District Line train at Parsons Green station thankfully did not result in any loss of life or serious injury. However, the financial loss to the local business community is more difficult to gauge, as it is unlikely that conventional terrorism insurance cover offered via Pool Re would extend to cover losses from business interruption in those circumstances. Terrorist events earlier in the year at Westminster Bridge and around Borough Market led to businesses in the direct locality incurring trading losses through closure while not directly suffering any property damage caused by the terrorist event itself.
Insurance for Terrorism – Pool Re
As background, Pool Re was established in 1993 as a response to the market failure that was triggered by the bombing of the Baltic Exchange. The costs of the Provisional IRA’s mainland bombing campaign in the 1990s led to reinsurers withdrawing cover for terrorism-related damage, with insurers compelled to follow suit. Pool Re was founded by the insurance industry in cooperation with, and backed by funding from Her Majesty’s Treasury. In 2002 Pool Re extended to include coverage of chemical, biological, radiological and nuclear threats.
Pool Re terrorism insurance cover was not designed to deal with claims emanating from businesses which are forced to shut down when the building they occupy is not physically damaged following a terrorist event. In the immediate aftermath of both the Westminster and Borough Market attack many businesses in the vicinity were forced to close for several days, as they were located directly within an exclusion zone set up by the Government agencies or a crime scene cordon established by the Police investigating each terrorist event. Employees and customers alike were prevented from gaining access to shops, restaurants and small business properties.
Several insurance providers now offer terrorism insurance cover independently of Pool Re, providing more flexible coverage including non-direct physical damage business interruption cover. The rates are more competitive than Pool Re and the cover may be more relevant to a business owner or premises operator whose livelihood may be impacted by street closures following a terrorist event.
Simon Lovat; a Director at Inperio, a Lloyd’s coverholder who offer terrorism insurance commented:
“The limited commercial providers of Terrorism Insurance such as Inperio have been providing broader and more suitable definition for years. Our products responded to the attacks in Westminster, and in Borough Market and if clients are prepared to forgo coverage in respect of Nuclear, Chemical and Biological attacks in our opinion products offered by the commercial insurance community provide a broader range of more relevant covers that those which are provided by Pool Re.”
Although predicting what is going to happen with regards to terrorism threats in the future is nigh on impossible; in my opinion a business is more likely to suffer a business interruption loss because of a terrorist act which occurs in their vicinity and disrupts business operation and trading income, rather than a loss suffered directly from a Nuclear, Chemical or Biological attack. If you are concerned about the risk to your business of a terrorist attack, you should perhaps investigate the benefits a dedicated Terrorism Insurance policy can offer. Along with Inperio, we are also able to advise accordingly.
For further information on Terrorism Insurance please contact Tony Gibbs on 0118 9165 485 to discuss or complete our ‘Get in touch’ enquiry form at the top of the page.