You may be right in thinking your business is unlikely to be the target of a terrorist attack. However, it is possible that you are indirectly impacted, and your business impaired, by the aftermath of an attack. This could be due to your supply chain being impacted, your clients being put out of business, collateral damage or denial of access as a result of a Terrorist attack.
Why is terrorism cover so important?
It is important to note that your property may not be the principal exposure, meaning you could have a significant gap in your insurance cover should the attack happen away from your premises. Commonly, business owners assume that their commercial property insurance provides cover for terror-related risks.
In the UK, following the Baltic Exchange bomb in 1992, all UK insurers stopped including terrorism coverage on their commercial insurance policies, with effect from 1 January 1993. Therefore, generally cover is excluded or restricted for terror-related products on commercial property policies and is sold separately as a specialist product. As a consequence, the government and insurance industry established the Pool Reinsurance Company Ltd (Pool Re).
SMEs (small to medium enterprises) have found themselves hard hit by some terrorist attacks, having been caught behind police cordons, seeing reduced footfall following an attack and/or not being compensated for losses caused by substantial business interruption. Losses are unlikely to be confined to the obvious potential of property damage or lost revenue due to a temporary closure – the impact of an attack can extend to months.
In recent years we have seen a growing trend towards less sophisticated attacks, such as those where knives or vehicles are used – both of which are easy to obtain and tend to attract little suspicion. As well as this, more recent plots and attacks have seen less obvious locations, beyond our major cities, being targeted, including Yorkshire, Sussex, Cumbria, Lancashire and Glasgow.
The FSB suggest that only 10% of businesses take out terrorism insurance** and that this is even lower outside of London. The reason for this is often down to business owners considering themselves to be at low risk of suffering from the effects of a terrorist attack, or not prioritising the cover due to having to work to a strict budget. However, it is an important cover to consider, with various options available.
Arranging terrorism cover
Pool Re, the government-backed terrorism reinsurer, offers one option for business owners looking to take out cover for terrorism. This allows you to buy terrorism insurance that will pay out if you have damage to property or lose custom due to a terror attack. With Pool Re you have to insure all properties owned by you. There are also open market alternatives for terrorism cover where insurers will set premiums differently depending on their capacity, their demand for this type of cover and their desire and ability to take the risk on. They are also able to insure individual risks, unlike Pool Re. As with any insurance, it is paramount that you understand what the different policies you’re considering cover and exclude.
It has also been recognised that cyber threats are becoming more common; such tactics are being used by terror groups and state actors to disrupt businesses. Cyber methods also enable terror to have a global impact, and quickly. Therefore, cyber risk insurance is another essential aspect of insurance you should be considering as a business owner.
How we can help
It is important, not just in relation to terrorism cover but insurance in general, to remain vigilant and not become complacent. You need to understand the potential risks to your business and make informed decisions about how to run and protect it to meet your specific vulnerabilities. If you would like to discuss your exposure to risks relating to terrorism or cyber (or in any other area), our Commercial Team would be happy to discuss the policies available and their scope.
Find out how we can help your business, here.
If you would like to speak to our Commercial Team, you can contact them at firstname.lastname@example.org or by calling 01653 609151.
*Small business as usual: strengthening resilience against 21st century terrorism, fsb.org.uk, November 2017