An insurance law expert believes the industry’s understanding of terrorism insurance in the UK is widening, following the recent attacks in London and Manchester.
Pinsent Masons’ Nick Bradley, in his analysis published on Out-Law, said this broadened understanding could result in a permanent shift away from policies based on damage to property.
“The real damage caused by the ‘lone wolf’-style tactics adopted by the attackers at Westminster, Manchester Arena, and London Bridge was loss of life, injuries, and significant disruption to local businesses,” he pointed out. “So-called ‘denial of access’ cover, for example, tends still to be linked to property damage.”
Bradley said insurers must therefore focus on how business interruption cover is being extended beyond the realm of property damage. He said the recent attacks, which targeted civilians and not property, “would have been completely unforeseeable when Pool Re (the UK’s government-supported terrorism risk reinsurer) was established in 1993.”
He recalled that Pool Re came to life partly in response to the IRA bombing of the Baltic Exchange in London in April 1992. “That attack, which killed three people, destroyed the Exchange building and caused huge property damage in the centre of the City of London.”
Citing a recognised ‘insurance gap’ for business interruption arising for non-property damage, Bradley said insurers viewed terrorism risk as the risks of an organised plot or threat for doing damage to property.
For him the question now would be how quickly insurers might be able to adapt to the new realities. “The development of contingent business interruption cover in response to recent earthquakes and floods that have affected global supply chains is a good example of an alternative approach,” he said.
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