Bill allowing Pool Re to cover non-damage business interruption


Pool Re has welcomed Royal Assent being given to the Counter-Terrorism and Border Security Bill 2018 which will allow Pool Re to cover losses incurred if a business cannot trade or is prevented from accessing its premises in the wake of a terrorist attack. Before the law was changed, Pool Re could only reinsure losses incurred if a company’s premises had been physically damaged by terrorists.

The gap in insurance coverage was highlighted in the 2017 attacks on Manchester and London Bridge, where small and medium-sized businesses were shown to be particularly vulnerable with several caught behind police cordons or experiencing a reduction in footfall following the events. They suffered significant, and in some cases crippling, business interruption losses for which they could not be compensated, either because they had not purchased terrorism insurance, or because the cover excluded business interruption if their premises had not been damaged.

“Today’s amendment changes that,” said Pool Re’s Chief Executive, Julian Enoizi. “We have worked very closely with the government, and with the industry since it opted to mutualise the non-damage risk in 2017. Perhaps more importantly, we are already collaborating with business federations, local authorities, brokers and our Member insurers, all of whom need to have open conversations with their customers about just how much may depend on having this cover if the worst should happen.”

John Glen MP, Economic Secretary to the Treasury, added: “We will not allow terrorists to change our way of life. So, when businesses raised their concerns about a gap in insurance cover following a terror attack, we worked with Pool Re to come up with a solution. Today, we’ve changed the law to give businesses peace of mind, helping them to insure themselves against financial loss as a result of a terrorist attack, even if there is no physical damage to their property. This means businesses will be able take out new and comprehensive policies to protect them in the future.”

The passing of the Bill marks a crucial development in UK financial resilience to the evolving patterns and methodologies of terrorism. Pool Re was set up in 1993 to protect businesses and the insurance industry from the impact of the IRA’s mainland bombing campaign, which targeted high-value infrastructure and prioritised economic disruption. Within its legislative limits, Pool Re has paid hundreds of millions in claims over its 25-year history at no cost to the taxpayer.

However, today’s terrorist threat to the UK is very different, with attacks here and across Europe since 2014 being more frequent and often less sophisticated. Although terrorists have targeted people indiscriminately, attacks have not necessarily resulted in physical damage to premises. This created a problem, given most terrorism schemes around the world were set up to primarily deal with damage to property.

Pool Re’s Chief Underwriting Officer, Steve Coates, added “It’s the sad reality that business-owners across the country now have a new set of perils that threaten their livelihoods. This amendment is a real turning-point for our industry’s ability to deliver the comprehensive protection businesses have been waiting for, but they’ve got to make the jump and buy the policy, and we have worked hard to make the new cover as accessible and affordable as possible. I would encourage any business owner to speak to their insurer or broker about what their current policy includes, and ensure it is extended to deal with terrorist threats.”

The amendment makes the UK’s terrorism reinsurance pool the first in the world to extend its cover to include non-damage business interruption losses.

“Our priority has been to keep this as far as possible a private market solution and so it will be reinsured by us via a new programme,” said Enoizi. “As we continue to identify and understand the protection gaps which emerge and bridge them through this unique public-private solution, we are focussing on helping the industry to grow by ensuring it becomes more comfortable with the exposure and thus reclaims more and more terrorism risk as we have seen recently with growing retentions and being able to cease contingency cover altogether.”