Terrorism Insurance cover evolves to meet changing risks
Attacks at Manchester Arena and London Bridge demonstrated a gap in the cover provided by terrorism insurance policies.
Written by Paul Brown on 29th May 2019
Cover was traditionally property focused, requiring there to be physical damage to trigger a claim. These attacks resulted in little, or no, physical damage to commercial properties yet many businesses were closed for several weeks as the police cordoned off large areas, public footfall declined and as a consequence many businesses suffered economic losses due to business interruption.
The retail, entertainment and tourism sectors are particularly exposed to falling revenues following denial of access to their premises and a reduction in footfall. Smaller businesses are most vulnerable as they are likely to be a single site operation and they lack the resources of large operations to plan, protect and recover from an attack.
Just as terrorist attacks have evolved such that property damage is no longer the greatest risk, so insurance coverage has evolved and cover is now available to include Non Damage Business Interruption (NDBI) losses. By purchasing a terrorism insurance policy, including NDBI, businesses can now feel reassured that they have cover in place for*
- Damage caused to their property and resulting business interruption caused by an act of terrorism.
- A terrorist incident near to their premises that prevents access to their place of business.
So what is the risk?
According to MI5 the current threat level from international terrorism in the UK is set at SEVERE and has been for some time. A SEVERE threat level means an attack is highly likely.
But isn't this risk restricted to the larger cities?
Whilst major cities have been a popular target for terrorist attacks, incidents have also occurred outside of the larger urban areas in recent times, including:
- February 2014 - New IRA parcel bombs to locations in Oxford, Brighton, Slough, Aldershot, Canterbury, Reading, and Chatham
- June 2016 - Murder of Jo Cox MP in Birstall, West Yorkshire
Despite the current threat level of international terrorism remaining at SEVERE in the UK, this cover is rarely purchased by SMEs. It is thought that the reasons why the cover is not popular include lack of awareness that the cover is available, lack of perception of the exposure "It won’t happen to me” and up until now the lack of NDBI extensions in policy wordings.
In the current climate and with cover improvements it is appropriate for businesses to revisit their terrorism insurance requirements as part of their insurance portfolio. Speak with your usual Franklands adviser on 01332 545720.
*subject to full terms and conditions of policy