Is your business covered for the risk of terrorism?

The damages to property and life as a result of terrorism used to be part of insurance policies available to businesses in the past, but in 1993, after a targeted campaign by the Provisional IRA’s bombing of financial targets and city centres, cover was withdrawn by most insurers. As a consequence, the UK government, working alongside the insurance sector, established the Pool Reinsurance Company (Pool Re). Primarily funded by premiums paid by policyholders, the government guarantees the fund, and the fund has so far paid out over £635 million in relation to 17 separate terrorism events.

The biggest concern though from a business owner’s perspective is that Pool Re doesn’t cover public liability risk, instead the coverage only extends to property damage in the face of a terrorist attack. Terrorism insurance is important for loss and damage to physical assets such as buildings, contents, business interruption, but also need to address the horrific implications of injury and loss of life.

There are also new threats in the form of chemical and biological attacks, drones, cyber attacks, vehicle attacks and knives. The considerations on a business that is offering a safe space for customers to enjoy spending time visiting their premises need to be addressed, and the work that the Government has done keeping pace with threats have helped support legislation (Martyn’s Law – The Protect Duty for example) that will help all businesses address the security of their customers as well as potentially create additional exposures and gaps in existing coverage. Many contracts such as JCT and NEC in the construction sector require such cover, and the majority of lenders/mortgage companies require that the peril of terrorism insurance is covered.

Who should be covered?
Terrorism insurance is a cover that really should be considered for businesses in high threat alert areas and with high public footfall areas, with further considerations around busy festivals/religious celebrations, and periods such as Christmas, Eid and Diwali. The current national threat level to the UK (England, Wales, Scotland and Northern Ireland) from terrorism is substantial, which means an attack is highly likely.

Recent notable attacks
To look at the threat of terrorism in perspective, it is prudent to review the incidents that have occurred over the last 15 years or so. For any business to properly plan for any such attack, they must firstly make sure all possible precautions are in place, but also plan for the potential eventuality of an attack, and to ensure that they are both covered from a personal perspective and their customers and staff are also covered. It’s a horrendous thing to consider, and the emphasis here is on prevention rather than mitigation, but what can be learned from past atrocities is that the style and nature of attacks can be understood and actions can be taken operationally within the retail and hospitality sector. There are many resources available to help businesses safeguard against such events, making it difficult for terrorists to carry out an attack and ultimately ensure the safety of staff and customers.

However, the insurance sector can offer specific terms and cover for a specific business or organisation. All venues, and business environments (let’s not forget Cyber Terrorism) can be a target. Damage and duress can be more than physical attacks on customers. Property damage, business interruption, for example – these are the hardships that can inflict additional damage to a business that simply wished to accommodate their customers and keep both customers and staff safe.

So, what are my options?
Terrorism cover is most conventionally placed with Pool Re (issued through a property insurer, for example Aviva, AXA etc.) who provide cover for the peril of explosion and act as a government backed reinsurance facility for the provision of terrorism cover. This coverage however has weaknesses, since it does not automatically cover non-damage BI, denial of access, loss of attraction or individuals acting alone and selection against is not permitted. However, there are other options to consider for the purchase of terrorism cover such as the extension of explosion cover to satisfy the contractual requirements; including for blocks of flats as a result of Qdime Limited v Bath Building Management Company Limited & Ors.

If you have premises that regularly entertain customers, it may be a good option to consider terrorism public liability insurance (which is increasingly being excluded under standard PL policies), plus further covers related to the threat as relevant.

If you do feel you have potential risks to address, and would like guidance on the differing covers available, please contact me to arrange a chat.
Every business is different, and specific terms can easily be arranged to accommodate your individual business needs.

James Woolerton from Tristar Special Risks, working alongside Steve Marrs from Konsileo, is a specialist underwriter for terrorism cover.

He has this to say about current risks and the need for specific cover:

“There have been developments since the Manchester bombings around both risk management and insuring responsibility in terms of responsibility of the safety of the public. This has repercussions around the Public Liability section since insurers are generally now excluding terrorism under the Public Liability section.

“There is currently no general legal responsibility to insure that aspect; but it does mean the insured/proposer ought to be aware of developments, and that it’s very unlikely they have the cover under their usual insurance arrangements (and should check) since its likely they have an uninsured exposure.

“This is fairly likely to become a huge consideration for any risks which effectively invite the public on to their premises for any reason and likely to be governed in part by ‘capacity’ as well as risk type; but I can foresee that shopping centres, individual shops, restaurants, art galleries, nightclubs, pubs, theatres, cinemas, outdoor markets, concert halls, etc may be within scope; although all this remains to be finalised.

“The legislation is not yet finished, and I’d imagine there will be a bedding-in period in terms of the legislation and how it’s monitored and enforced, but from a risk management perspective it is something business owners should already be thinking about, and from an insurance perspective it is very likely that it’s a new exposure to be concerned with.

“Ultimately now if the Public Liability Insurers exclude terrorism under the Public Liability section, they already have an uninsured exposure which should be carefully considered and discussed with insurance brokers.

“The solution to this already exists via TriStar Special Risks.”

Commercial Insurance – Done Properly