The Business Insurance Bureau

Terrorism Insurance

"It wasn't until everyone was running past me that I realised what was going on..."

What is Terrorism Insurance?

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.

‘POOL RE’

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 (aka 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.

More Recent Attacks:

Finsbury Park terror attack: Just after midnight on June 19 2017
A van driver mowed down Muslim worshippers on Seven Sisters Road near Finsbury Park mosque in the very early hours of June 19.

London Bridge terror attack: June 3 2017
The London terror attack killed eight people and injured many others on London Bridge and in nearby Borough Market on June 3.

Manchester terror attack: May 22 2017
The Manchester terror attack killed at least 22 people and injured 59 others at an Ariana Grande concert at Manchester Arena on May 22.

Stockholm attack: April 7 2017
Four people were killed and at least fifteen were injured when a man drove a truck down a busy shopping street.

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.

Let's make it cheaper, by doing it right

What's Covered?

Property

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

Computers

Engineering

The position in respect of terrorism exclusions applying to other covers, such as Money, Theft and Goods in Transit, is more variable between companies.

Legal Liabilities

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.

Motor

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.

Frequently Asked Questions

Regrettably there is no easy answer to this question. In general, high media profile targets i.e. anything that will get lots of media attention. These targets are also likely to include high value property or so called soft targets like hotels, airports, banks or bus stations. Industrial locations are generally less welcoming to the public and usually have more physical security.

Whereas shopping malls may have good CCTV and physical security, they are also often of high value with easier access for a terrorist to slip in unnoticed due to the number of people milling about.

We use a broad definition of Terrorism e.g. Terrorism is an unlawful act, including the use of force or violence, by person or group, acting alone or on behalf or in connection with any organisation(s). The act could be committed for, political, religious or ideological purposes, trying to influence government and/or putting the public in fear, for such purposes.

It is an intentionally wide definition, so that we can extend coverage for pressure groups such as animal rights and environmental campaigners.

Except for Sanctioned countries, yes. Worldwide coverage is available. In some countries, due to the local regulators, cover must be bound as a reinsurance of a local company.

The following forms of insurance must offer cover for claims arising from terrorism:

  • work-related accident insurance
  • civil liability motor vehicle insurance (civil liability only, not full-risk insurance)
  • civil liability insurance for fire and explosions for institutions which are generally accessible to the public
  • common risk fire insurance (e.g. for homes)
  • accident insurance
  • sickness insurance
  • life insurance

For all other forms of insurance, claims resulting from terrorism are covered unless the insurer has explicitly excluded this coverage under the general terms and conditions of the insurance policy.

Yes, we have insurers who will provide theft or looting coverage following a named peril. Additionally, we can cover damage caused by local police or authority during their efforts to control or suppress an event.

It is not mandatory for travel insurance policies to include cover for claims resulting from terrorism.

If your policy’s general terms and conditions do not include an explicit exclusion of terrorism, then you are indeed covered for terrorism.

Insurers can exclude injury or damage caused by nuclear weapons from their terrorism cover.

This must be explicitly listed as an exclusion under the policy’s general terms and conditions. Insurers can also list other exclusions, but only for insurance policies where cover for acts of terrorism is not mandatory.

Let's make it cheaper, by doing it right

Making the small print...BIG

A Fair Presentation of the Risk
At the heart of insurance contracts is an obvious truth: you have an enormous advantage over the insurer. You know all about your business, its history, processes, people and management, but the insurer knows nothing – other than what you tell them.

Your Duties
You have a statutory duty to make a fair presentation of the risk. You must tell the insurer:
• Every material circumstance which you know or ought to know and/or
• Sufficient information that would cause the insurer to make further enquiries, if neccessary, to review those material circumstances

Your Knowledge
• You are deemed to have the knowledge of the company’s senior management.
• You are deemed to have the knowledge of the person arranging the insurance (who is deemed to be a senior manager under statute).
• Anything that can be discovered by a reasonable search.

A failure to make a fair presentation of the risk gives the insurer various remedies, depending upon the nature of the failure, from avoiding the contract and not paying claims to modifying the basis of settlement. 

Examples of Misrepresentation
It is often easier to demonstrate the consequences of risk presentation failure by example rather than theory. Here are some real life examples of typically forgotten or unrevealed material facts which later caused huge problems and repudiated claims:

Fire

Theft

Water

Liability

Motor

General

A reprocessing plant did not reveal a series of small fires during their insurance year.

Following repeated false alarms, a retailer didn’t reveal that Police Response had been withdrawn.

A restaurant omitted to reveal repeated minor floods from an upstairs nightclub.

A construction company didn’t reveal potential employee claims recorded in their accident book.

A company failed to reveal written warnings to an employee over repeated dangerous driving.

A company failed to reveal that it had been ‘struck off’ by Companies House and was trading as a new legal entity under a different designation.

Compiling the Risk Presentation: an ongoing process

The compilation of risk information for presentation to an insurer might be thought to be simply contained in a proposal or risk presentation form, however, such forms are not exhaustive and cannot take account of circumstances which change beyond their
compilation. Moreover, merely referring insurers to your website or dumping data is not making a fair presentation of the risk. ’Fairness’ is a subjective test but it would certainly involve simplicity, clarity and relevant selection.

Ongoing communication is vital, because the duty to disclose material circumstances is ongoing throughout the insurance year and at renewal of the insurances.

It’s important…

It is not possible to overstate the importance of researched, adequate risk presentation – there have been countless legal disputes, repudiated claims, ruined businesses and lives arising from the simple failure to reveal all the facts to an insurer. A failure to present risk adequately is a bigger risk than the risk you present.

It doesn’t matter that the failure is innocent, something overlooked, forgotten or discounted as unimportant – it might be important to the insurer, in which case it must be revealed.

Should there be anything not yet disclosed, or that you are unsure would influence your insurers about this insurance tell your broker/insurer immediately. 

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Working With Us

  • Services
  • Payment Terms
  • Confidentiality & Security
  • Claims
  • Cancellation Rights
  • Duration & Termination

The Business Insurance Bureau conducts both client and market research to identify solutions to the needs of an almost exclusively business clientele. We will make a recommendation once we have assessed your demands and needs.

All premiums due to insurers must normally be paid by you on or before the date that cover commences. Where alternative methods of payment are available these will be discussed with you so that arrangements can be put in place by the due date.

We are registered with the Data Protection Registrar. We will ensure that any information obtained from you is treated by us and anyone else involved in arranging, considering to arrange or managing your insurance, as Strictly Private and Confidential. We will not provide your information to anyone else unless we:
have your permission to do so, or -are required to by the FCA, or -are required to do so by law, or -are required to do so in the normal course of arranging or negotiating and maintaining, or renewing financial services products which we may from time to time approve.We take appropriate steps to ensure the security of any money, documents, other property or information handled or held on your behalf.

All information in any form, with the exception of policy documents and certificates issued on behalf of insurers and supplied by us, to you, should be treated as Strictly Private and Confidential and not be released directly or indirectly to any other party, without our explicit consent.

Note: in transacting your insurances with The Business Insurance Bureau, you are deemed to have accepted our Terms of Business. Your accepting of these Terms of Business does not affect your statutory rights.

You must notify us as soon as possible of a claim and circumstances which may give rise to a claim. In the event of a claim you should contact this office and we will promptly advise you and if appropriate, issue you with a claim form and pass all details to your insurer. You should not admit liability or agree to any course of action, other than emergency measures carried out to minimise the loss, until you have an agreement from your insurer. We will remit claims payments to you as soon as possible after they have been received on your behalf. In the event that an insurer becomes insolvent or delays making settlement we do not accept liability for any unpaid amounts.

You would have the right to cancel a policy within 14 days of its inception or upon receipt of the policy documentation whichever is the later. You would as a Consumer and without providing a reason, cancel the policy by confirming this is in writing to the address of our office through which your policy was placed. Any policy documentation and in particular any legal document, i.e. Certificate of Motor Insurance, Employers Liability Certificate, MUST be returned with your instruction to cancel. By exercising your right to cancel the policy, you are withdrawing from the contract of insurance.

Our services may be terminated without cause or penalty by giving one months’ notice in writing. In the event that our services are terminated by you other than at the expiry of the policy we will be entitled to retain any fees and all of the brokerage payable. The responsibility for handling claims reported after the date of termination shall in the absence of an express agreement be the responsibility of the party taking over the role.