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Protect Your Business From This Ever Growing Set of Hazards | Add Terrorism Insurance Cover To Your Policies
Terrorism is not a new risk to life and property in the United Kingdom. Terrorists with various agendas have been a threat for hundreds of years. However, in recent decades the frequency, severity, audacity and geographical reach of terrorist attacks activities have has increased enormously. The problem isn’t restricted to traditional targets such as government buildings, or even city centres. Understandably, business owners, risk managers and insurers are concerned with mitigating the risks posed by increasingly prevalent, damaging and random terrorist attacks.
Furthermore, losses, costs, damages and expenses from the acts of terrorism are typically excluded from standard commercial and property insurance policies. Therefore, where Terrorism insurance cover is required, this must either be added on as an extension or purchased as a stand-alone policy. Indeed, it is becoming more common, particularly with commercial property, for banks and lenders to insist that Buildings are covered for Terrorism losses, in addition to the usual standard perils.
By arranging Terrorism cover, you can protect your property and/or businesses from serious and potentially devastating risk.
The Pool Reinsurance Company
There were significant financial losses during the Troubles in Northern Ireland in the 1980s. Therefore, the UK insurance industry felt that it could no longer sustainably cover the damage caused by terrorist acts.
In response, in 1993 the government created the Pool Reinsurance Company (Pool Re), a government backed insurance pool. Pool Re is a programme where participating insurers pay losses from a terrorist attack up to a certain point. If losses exceed that threshold, insurers draw from Pool Re’s accumulated funds. If Pool Re cannot cover the losses, the company turns to the government.
Furthermore, Pool Re guarantees that insurers can provide Terrorism insurance cover. In addition, meet the insured’s claims through underwriting by the government. Several UK insurers aren’t affiliated with Pool Re. and so are unable to provide this cover. In such cases, stand-alone cover can be arranged.
Pool Re only applies to England, Wales and Scotland; it does not extend to the Channel Islands or the Isle of Man. However, a separate scheme exists in Northern Ireland. The insured must prove that the property damage was caused by terrorist action. If successful, the insured can pursue recovery from the government.
What Is Terrorism?
The complexity of Terrorism insurance cover usually arises from the discrepancy between the actual definitions of terrorism. In the United Kingdom, both the Reinsurance Act 1993 (Acts of Terrorism) and the Terrorism Act 2000 have their own statutory definitions of terrorism.
Furthermore, different insurers also have their own definitions of terrorism, which can lead to confusion and gaps in cover. As a result, some insurers offer terrorism ‘gap’ cover, to protect against shortfall.
A typical insurer defines terrorism as an act:
- That includes but is not limited to the use of force, violence or threats on any person or group of persons.
- Made by someone working alone or on the behalf of or in connection to any organisation or government.
- Committed for political, religious, ideological or similar purposes. This includes the intention to influence any government and or to put any section of the public in fear.
In 2003 an expansion of cover was triggered by the September 2001 attacks on the United States. Therefore, terrorism insurance is now offered on an ‘All Risks’ basis. Thus providing cover for any loss not specifically excluded.
It is important to know and understand exactly what your policy covers and excludes.
Typical Exclusions Of Terrorism Insurance
Because Terrorism insurance cover is offered on an ‘All Risks’ basis, policies will generally name specific exclusions.
One common exclusion of terrorism cover is certain types of property. For instance, those located on licensed nuclear sites and those insured under marine, aviation or motor policies. Additionally, other common exclusions include losses sustained from:
- Digital and cyber-risks
- Strikes, riots and civil unrest
- Communicable diseases
Terrorism creates numerous liability risks, including Public Liability and Employers’ Liability concerns. Terrorist acts happen unexpectedly and by their very nature can cause catastrophic and indiscriminate damage. Therefore, businesses with inadequate Public Liability cover are particularly vulnerable.
As a result of a terrorist attack, if a business is found liable for third-party injury, that business may have to meet the cost of huge losses. This liability has been more historically targeted towards property located in congested or urban areas. Otherwise, near potential terrorist targets where many people could be affected by a single attack. However, as events in recent years have proved, they can happen anywhere.
Inadequate Employers’ Liability is also a concern. Some employers may opt for the minimum statutory Employers’ Liability amount of £5 million. However, losses resulting from terrorist action can easily exceed the required minimum amount. It has never been more important to ensure that your policy has adequate protection. Many insurers now provide £10m cover as standard, but even this may potentially be insufficient for certain businesses. For instance, those with a high concentration of employees in a single urban environment.
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