Executive Director, Duncan McClean, shares his views on non-damage terrorism insurance and looks forward to the annual BIBA conference and exhibition next week.
Terrorism - a horrific and common place feature of the modern-day world we inhabit.
Having been made in Northern Ireland myself, and by parents from either side of “the divide”, I’ve seen more than most readers here, the devastating effects that Terrorism can deliver in terms of damage to people, lives and property.
We all hoped the Good Friday Agreement, which celebrates its 20th birthday this year, would see the eradication of Terrorist organisations and activity, certainly here in the UK.
Sadly, the reality is the polar opposite. Yes, the Agreement has been an undoubted success story, resulting in two decades of “relative” peace in Northern Ireland and the cessation of IRA bomb attacks across the UK, but as we all know, the last decade has seen the emergence of Islamic extremist related Terrorism, reaping death and destruction globally on an unprecedented scale.
We’ve seen and continue to see, high levels of property damage, causing devastating losses to the businesses affected. With the UK Terrorism threat level at what seems a constant “severe” – protection by way of specific, tailor made terrorism insurance is essential for modern day businesses.
More recent years however, have also seen a significant change in the nature and modus operandi of attacks.
As shockingly evidenced by the awful events at London Bridge, Borough Market and Manchester Arena, with the use of handheld weapons, explosive devices and motor vehicles, contemporary terrorists are just as content to direct their evil acts towards causing human casualties as they are about causing property damage. Their focus has been directed against civilian targets such as public or crowded places, shopping areas, entertainment venues, hotels, bars and restaurants etc.
Whilst economic damage is not the prime objective, it is most certainly a hugely significant consequence of what they do – so much so that businesses can and indeed have suffered financial ruin.
Following the Borough Market attack alone, literally 100’s of businesses, not only at the scene itself, but within the extended area, were devastatingly affected following the 11 day closure of the market.
Police cordons and exclusion zones can bring very serious financial consequences for businesses such as loss of income due to “Denial of Access” and indeed longer term economic damage by way of “Loss of Attraction” e.g. reduced visitor numbers, footfall. The vast majority of businesses at Borough Market were left uninsured – this due to either failure to take out insurance coverage at all, or more commonly that their coverage (via both Pool Re and the standalone market) simply did not respond, because the property damage requirement for BI cover had not been triggered.
With malicious attacks such as Borough market being generally “non-damage” in nature (i.e. there is no physical damage to property) - a huge gap has been exposed in the way the UK terrorism market works (or more to the point doesn’t work) and I’m referring here to both the 25 year old Pool Re model, but also standalone carriers. BI covers are simply not responding and policyholders are being left uninsured.
Some standalone carriers have subsequently claimed to provide extensions, cunningly badged as “non-damage” but I offer some words of caution here – check the wording carefully!
Under scrutiny you may well find that yes, whilst physical damage isn’t required at the specified policy locations, it is still a requirement to trigger BI cover, should the attack occur within the surrounding area. So, not quite full non-damage coverage to my mind!
Recognising that policyholders’ needs are not being met, and that risk and exposure to modern day Terrorism is not all about just the nature and location of your client’s businesses, but also what happens to be located around them, NMU have responded with our new, enhanced terrorism product.
As standard, this now incorporates vital elements of “non-damage” BI cover, by responding to both Denial of Access and Loss of Attraction events triggered by either damage or non-damage/malicious attack events.
In terms of these enhancements to cover and perhaps most crucially, physical property damage is not a required trigger, neither at the specified policy locations nor within a defined perimeter surrounding them.
Referring back to the start of this blog, regrettably, it’s obvious that any kind of present day Good Friday type agreement will never be enough to put a stop to the evil that is global Terrorism. The only crumb of any comfort is that from a business perspective, it’s now possible via NMU, to properly protect balance sheets against the catastrophic financial consequences and effects.
For those brokers attending the annual BIBA Conference and Exhibition next week and interested in discussing our new product further, myself and our Terrorism Underwriting Manager, Gary Barlow (no, not that one) will be in attendance on the NMU stand. We look forward to welcoming you onto stand B30 next week. If you want to attend the BIBA Conference but you’ve not yet registered, you can do so for free here.