Acts of terrorism can take many different forms, but typically include bombing, assassination, hijacking or random killings. They are carried out by organisations for political rather than military purposes and by groups generally too weak to mount an open assault on a government or state.
Although the roots for terrorism lie in ancient Greece, it is now regarded as a modern tool, sometimes utilised to devastating effect by individuals who feel alienated and possibly unrepresented by the society in which they live. Governments find terrorism very difficult to prevent and all the while its psychological impact on the public is increasing because of extensive coverage by the press and international media.
In common with many other countries, the UK has had to live with the threat of terrorism for a number of years. In response to the threat from the IRA’s mainland bombing campaign in the early 1990’s, the Pool Reinsurance Company Limited (Pool Re) reinsurance facility was established in 1993 as a mutual re-insurance company to provide cover for property damage and business interruption losses following fire or explosion caused by terrorist acts.
Pool Re is owned by its member insurance companies writing business in the UK commercial property insurance market, with HM Treasury backing as reinsurer of last resort.
11TH SEPTEMBER 2001
The terrorist atrocities in the United States of America on the 11th September 2001 had the effect of changing both the availability and the methods of providing terrorism insurance cover throughout the insurance industry worldwide.
THE CURRENT SITUATION IN THE UK
Since the beginning of 2003, the situation exists whereby most commercial property insurers provide very little, if any, cover against acts of terrorism in their standard policies.
Policyholders are now free to decide whether or not they wish to purchase the insurance cover provided by Pool Re, via their insurer, to protect them against terrorism risks.
WHAT IS AN ACT OF TERRORISM?
There is no single agreed definition of terrorism. A definition will appear within a policyholder’s policy but this will vary depending on the insurance company concerned and the nature of the cover.
Pool Re uses the following definition:
Acts of persons acting on behalf of or in connection with any organisation which carries out activities directed towards the overthrowing or influencing by force or violence of Her Majesty’s Government in the United Kingdom or any other government de jure or de facto.
A typical wording may also exclude harm or damage to life or property, or the threat of such harm or damage, and make specific mention of nuclear, chemical, biological and radiological methods being excluded.
Most insurers have removed terrorism cover as standard from their commercial property policies. However, as stated above, for member insurers, full cover is available via the Pool Re scheme.
Typically this applies to the following covers:
- Commercial Property
- Business Interruption
- Contract Works
- Book Debts
The position in respect of terrorism exclusions applying to other covers, such as Money, Theft and Goods in Transit, is more variable between companies.
Cover is provided by most companies for legal liabilities arising from an act of terrorism although there may be a lower limit than standard. For example, an Employer’s Liability claim may be restricted to £5,000,000 and Public Liability to £2,000,000.
Most commercial motor policies now limit cover for legal liability in respect of third party property damage caused due to an act of terrorism to £5,000,000 or the policy limit if smaller.
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