Recent research from the Insurer ACE suggests that 36% of UK Commercial organisations do not have cover in place in respect of losses resulting from acts of Terrorism.
In addition and perhaps of more concern is that 13% believe that Terrorism and Political Violence are covered under their normal policies.
This has lead me to research the subject a little further to see if this cover is generally available.
How is Terrorism defined?
This is covered by the Terrorism Act 2000 which states that an act of terrorism is any specified action, the use or threat of which is designed to influence any government or to intimidate the public in order to advance a political or religious or ideological purpose.
The specified actions are ;
a) involve serious violence against a person
b) cause serious damage to property
c) endanger a persons life (other than the person committing the act)
d) create a serious risk to the health or safety of the public
e) are designed to interfere with or seriously disrupt an electronic system
Do my existing policies cover Terrorism?
If the policy is covering a Commercial Property the simple answer is no it does not.
Most domestic Household insurance policies continue to provide the cover although is some areas this is starting to appear as an exclusion so this should be very carefully checked.
Can Terrorism cover be purchased for Commercial Properties?
Yes it can, most Insurers will allow the cover to be ‘bought back’ by payment of an additional premium.
These premiums are based on Post Code area and a classification code – inner cities such as London carry the highest premiums with rural areas being the cheapest.
What is Pool Re?
This is the pool reinsurance that Insurers have created – premium money goes into the pool out of which claims for terrorism are met.
The Insurer has to bear the first £100,000 of the claim from their own claim reserves but amounts in excess of this can be recovered from the pool.
In the unlikely event that the pool is not sufficient to cover all claims in an underwriting year the Government will top it up so are therefore acting as a guarantee that any claims will be met.
Can Terrorism cover be purchased in isolation?
No, insurance for the main perils of Fire and Explosion must be taken out first.
Can the Pool be cancelled?
Yes it can, it can be terminated from 31st December in any year by either the insurers or the Government giving at least 120 days notice.
Does my client need Terrorism cover?
Unfortunately its impossible to predict where an attack may take place and on what sort of target.
A full Risk Assessment may be needed – is your property a potential terrorism target, either because of the identity of the occupier or the activities carried out there?
Remember that terrorism takes many forms and can include activities directed against businesses and corporations as well as directly against Governments.
Consideration should also be given to arranging cover for Business Interruption following an attack as again this would not be covered under the standard policy.