The terrorism threat level in the UK remains at Severe, following an unprecedented rise in terrorism attacks in recent times.
The nature of events, as evidenced at London Bridge and Borough Market with the use of handheld weapons and motor vehicles, has shown that the modern day terrorists are more likely to direct their actions towards causing human casualties, rather than causing property damage.
As terrorists move away from causing property damage, businesses are increasingly exposed to uninsured business interruption (BI) losses because terrorism policies typically require physical damage as a trigger for BI cover. Many businesses are discovering to their cost that most insurers don’t cover such losses unless there is at least some physical damage.
Many clients currently purchase terrorism cover via Pool Re (which is the government’s reinsurance facility often provided as part of a commercial combined or property package), however, it is presently restricted by the 1993 Act only to pay out if physical damage has occurred to commercial property. The government are consulting over this matter in the hope this will change in the future, however, for now though these risks are uninsured.
Those in the retail, hospitality and entertainment sectors are particularly vulnerable to BI losses caused by the denial of access and subsequent loss of attraction that can follow events aimed solely at inflicting casualties, often in and around entertainment venues and tourist attractions. So, as well as damage to own and third-party property, you can now purchase cover that also responds to the use of vehicles, hand-held weapons and explosives devices aimed at causing death and injury.
The evolving nature of terrorism incidents brings a whole new set of risks and exposures not previously considered or catered for, particularly in relation to BI losses. Recognising this, especially if you are involved in any of the trades above – speaking to your insurance broker about these issues is vital.
By Dane Turner Dip CII – Broking Manager