The recent terror attacks, in both London and Manchester, have highlighted the issue of ‘terrorism insurance’ and how it affects business, business owners, senior management teams and employees.
The complexity of terrorism insurance usually arises from the discrepancy between the actual definitions of terrorism. In the United Kingdom, both the Reinsurance (Acts of Terrorism) Act 1993 and the Terrorism Act 2000 have their own statutory definitions of terrorism. Different insurers also have their own definitions of terrorism, which can lead to confusion and potential gaps in cover. As a result, some insurers offer terrorism ‘gap’ cover.
A typical insurer defines terrorism as an act: ..
• that includes but is not limited to the use of force, violence or threats on any person
or group of persons
• is made by someone working alone or on the behalf of or in connection to any organisation
• committed for political, religious, ideological or similar purposes, including the intention
to influence any government and or to put any section of the public in fear.
Because of a 2003 expansion of cover triggered by the Sept. 2001 attacks on the United States, terrorism insurance is offered on an ‘all risks’ basis—meaning it covers any loss not specifically excluded. Make sure that you know and understand exactly what your policy covers and excludes.
Typical Exclusions: Because terrorism cover is offered on an ‘all risks’ basis, policies will generally name specific exclusions. Common exclusions include:
• Losses sustained from war
• Losses sustained from digital and cyber risks
• Losses sustained from strikes, riots and civil unrest
• Certain properties, including those located on licensed nuclear sites and those insured under marine, aviation or motor policies
Public Liability: Terrorism creates numerous liability risks, including public liability and employers’ liability concerns.
Because terrorist acts happen unexpectedly and can cause untold damage, businesses with inadequate public liability cover are particularly vulnerable. If a business is found liable for third-party injury as a result of a terrorist attack, that business may have to cover huge losses.
This liability generally applies to property located in congested, urban areas or near potential terrorist targets where many people could be affected by a single attack.
Employers Liability: Inadequate employers’ liability is also a serious concern.
Many employers opt for the minimum employers’ liability limit of 10 million pounds with a limitation of 5 million pounds for acts of terrorism; hence the phrase on your certificate ‘no less than’ 5 million pounds. However, losses resulting from terrorist action can easily exceed the required minimum when you look at the accumulation risk.
A simple example here is not just one employee being injured or killed but perhaps a number of people who work for you. Particularly vulnerable businesses, such as those with a high concentration of employees in a single urban environment, are potentially under-insured for such a scenario and businesses should give consideration to higher Employers Liability limits of Indemnity,
- Do you Have a separate Terrorism Insurance policy in place?
- What is your Public Liability Limit of Indemnity?
- How many people could be working for you at one location?
- Do your employees work in what could be regarded as a high profile area?
- Are any of your buildings located in a city centre or terrorist threat hot-spot?
The above five questions are just a few of the questions you should be discussing with your insurance broker to ensure that your business, staff, customers and the general public are well protected should your business get caught up in a Terrorist incident.
Making sure that you have appropriate cover for that one incident “which will never happen to you or your business” is absolutely key if you are to avoid an under insured or uninsured situation. The repercussions of which could be disastrous for your business.
Thank you to Nigel Bailey of Wrightsure for his contribution to the above article.